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| Global Credit
Research |
| Rating Action |
| 3 AUG 2006 |
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MOODY'S CONFIRMS
CA'S RATINGS AT Ba1; OUTLOOK IS NEGATIVE |
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Approximately $1.8 billion debt affected
New York, August 03, 2006 -- Moody's Investors Service has confirmed
CA's Ba1 senior unsecured rating and assigned a negative rating outlook,
concluding a review for possible downgrade initiated on June 30, 2006.
The Ba1 rating confirmation reflects the company's completed accounting
review and reestablishment of current filing of its 10-K and subsequent
10-Q's, including the company's filing of its 10-K for its March 2006
fiscal year on July 31, 2006.
The negative outlook reflects challenges the company has to implement
effective financial controls, remediate material weaknesses to its
financial reporting, contain sales force compensation costs, and revive
client billings performance. The negative outlook also considers the
more aggressive financial policies of the company. Moody's notes that
for fiscal 2006, the company's former sales compensation plan resulted
in an unexpected $75 million increase to commission expenses (2% of
total expenses), while client billings declined slightly, excluding
acquisition related products and accelerated customer payments. In
Moody's opinion, current revisions to the former sales force
compensation plan could negatively impact morale, the retention of key
sales executives, and financial performance.
The company's Ba1 senior unsecured rating reflects its large
portfolio of mission critical software product offerings and installed
base of a diverse set of creditworthy clients, which in isolation could
potentially map to a high Baa rating. However, the rating also reflects
the uncertainties surrounding the company's ineffective internal
controls, subdued organic client billings performance, unsettled
fulfillment of the terms of the Deferred Prosecution Agreement (DPA),
modest returns on net assets, competition from integrated and
non-integrated technology vendors, and exposure to mature mainframe and
Unix markets, which drive the overall Ba1 rating. For further
information, refer to Moody's credit opinion for CA, Inc.
Headquartered in Islandia, New York, CA, Inc. is an enterprise
software vendor for enterprise management, security, and storage
applications.
New York
John Moore
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Alexandra S. Parker
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
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