March 20, 2012 / 11:29 AM / 6 years ago

TEXT-S&P puts NDS Group 'BB-' rating on watch pos on Cisco bid

March 20 -

Overview

-- U.S.-based technology firm Cisco Systems Inc. announced on March 15, 2012, its intention to acquire U.K.-based NDS Group Ltd. for around USD5 billion.

-- We are placing on CreditWatch positive our ‘BB-’ long-term corporate credit rating on NDS, our ‘BB’ issue ratings on the $1.050 billion equivalent term loans A and B, and on the $75 million revolving credit facility issued by subsidiary NDS Finance Ltd.

-- The CreditWatch placement reflects the high likelihood that we could raise the long-term corporate credit rating on NDS by several notches, in line with the rating on Cisco at a maximum, if the deal is successful. The CreditWatch status also factors in the likely repayment in full of all NDS’ debt on the transaction’s close.

Rating Action

On March 20, 2012, Standard & Poor’s Ratings Services placed on CreditWatch with positive implications its ‘BB-’ long-term corporate credit rating on U.K.-based NDS Group Ltd., a leading provider of digital media content security solutions for pay-TV platforms worldwide.

At the same time, we placed on CreditWatch with positive implications the ‘BB’ issue ratings on the $1.050 billion equivalent term loans A and B and on the $75 million revolving credit facility (RCF) issued by subsidiary NDS Finance Ltd.

Rationale

The CreditWatch placement follows the announcement by U.S.-based technology firm Cisco Systems Inc. (A+/Stable/A-1+) of its intention to acquire 100% of NDS for about USD5billion, including debt and retention-based incentives. The CreditWatch status reflects the high likelihood that we could raise the long-term corporate credit rating on NDS by several notches, in line with the rating on Cisco at a maximum, if the deal is successful, and factors in NDS’ enhanced credit profile, pro forma for the transaction, based on the integration of its operations into Cisco’s Service Provider Video Technology Group division. We put the issue ratings on NDS Finance’s loans and RCF on CreditWatch with positive implications because we anticipate that Cisco would repay them in cash on the deal’s close.

The offer is subject to regulatory approvals in several countries. We understand that Cisco will fund the acquisition with cash on hand.

The ratings on U.K.-based NDS Group Ltd. primarily reflect Standard & Poor’s view of the company’s aggressive leverage (before its acquisition by Cisco), narrow business focus, competitive environment, and exposure to long-term piracy and technology risks.

Our Standards:The Thomson Reuters Trust Principles.
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