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| Global Credit Research |
| Rating Action |
| 28 DEC 2004 |
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MOODY'S ASSIGNED COMPUTER ASSOCIATES
INTERNATIONAL A SPECULATIVE GRADE LIQUIDITY RATING OF SGL-1 |
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New York, December 28, 2004 -- Moody's Investors Service assigned a
speculative grade liquidity rating of SGL-1 to Computer Associates
International. This rating is supported by the company's substantial
liquidity, represented by its (i) approximate $2.2 billion cash and
marketable securities excluding proceeds received from $1 billion senior
notes offering on November 15, 2004; (ii) supplemental liquidity support
in the form of an undrawn $1 billion revolving credit facility; and
(iii) anticipated strong cash flow generation during the next twelve
months, factoring in some expected improvement in client billings and
bookings.
This SGL-1 liquidity rating reflects Moody's expectation that the
company will continue to report strong operating performance, with
growth to cash flows and client billings. Moody's expects that the
company will generate meaningful free cash flow of $1.2 billion (defined
as cash flow from operations less capital expenditures less dividends)
during the next twelve months. Coupled with the aforementioned cash and
cash equivalents balance, the company is expected to maintain
significant liquidity to meet the moderate interest expense and capital
expenditure requirements.
Moody's notes that $1 billion notes offering on November 15, 2004
will be used to refinance near term maturities of the $825 million in
senior notes due April 2005. CA can also call $660 million 5% senior
convertible notes due March 2007 and exercise its call spread in March
2005. Moody's notes that the 5% convertible notes are currently in the
money ($24.83 exercise price versus Wednesday's $30.88 closing price).
The next material notes maturity is not until April 2008 when $350
million senior notes mature.
Additionally in December 2004, CA replaced its $470 million unsecured
revolver with a $1 billion four year unsecured revolver, which provides
supplemental liquidity support. The new revolving credit facility has
significant improvements in terms of reduced financial covenants,
greater flexibility with regard to restrictive payments and elimination
of material adverse change clause. Moody's notes that the company is
expected to remain well within compliance with the financial covenants
for the next twelve months. Further, the company has potential to secure
additional alternate liquidity support, specifically, based on terms to
its existing credit agreement, CA is permitted to secure up to $900
million in additional indebtedness through an AR securitization program
and other liens securing debt.
Headquartered in Islandia, New York, Computer Associates
International is an enterprise software vendor for enterprise
management, security, and storage applications.
New York
Brian Oak
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
John Moore
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
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