TEXT-Fitch affirms Broadridge Financial Solutions

Thu Jun 28, 2012 11:18am EDT

June 28 Fitch Ratings has affirmed its ratings for Broadridge Financial
Solutions, Inc. (Broadridge). 

The ratings and Outlook are supported by the following considerations:

--Broadridge has a leading share in the proxy distribution market, which Fitch 
views as facing minimal competitive threats and pricing that is largely 
insulated by SEC regulations;

--The company's core Investor Communications and Securities Processing business 
segments produce steady free cash flow with minimal exposure to economic 
volatility;

--Long-term customer contracts and customer relationships in both core 
businesses;

--Broadridge has a diverse customer base with no customer representing greater 
than 7% of total revenue, and expectations of achieving greater geographic 
diversification by capitalizing on growth opportunities in international markets
going forward; 

--The low capital intensity of Broadridge's business model has produced high 
historical returns on invested capital.

Ratings concerns include the following:

--Changing regulations could negatively impact Broadridge's business, 
particularly related to the proxy distribution business;

--Broadridge's acquisition growth strategy carries integration and execution 
risks; 

--Execution risk related to the company's processing of confidential client 
information and the risk of security breaches as well as operating risks 
stemming from the mission-critical nature of the company's securities processing
solutions.

The ratings reflect the following financial expectations:

--Broadridge can organically grow revenue in the low- to mid-single digits with 
periods of higher growth driven by acquisitions;

--EBITDA margins should rebound closer to the historical average of 20% going 
forward once the migration of processing services to IBM is completed;

--Free cash flow to adjusted debt is expected to remain within a range near 20% 
with adjusted debt to EBITDAR of approximately 2x or less. Fitch currently 
estimates free cash flow to adjusted debt at 18.2% and adjusted debt to EBITDAR 
at 2.1x; 

--Broadridge will utilize excess free cash flow for share repurchases and 
acquisitions;

--Quarterly results will remain volatile depending on the level of event-driven 
revenues but as Broadridge continues to diversify its business beyond proxy 
services, year-to-year volatility in results will be reduced. 

Liquidity as of March 31, 2012 was solid at $719 million, which includes $219 
million in cash and $500 million available under the company's $500 million 
senior unsecured revolving credit facility which matures in September 2016. 
Fitch expects annual free cash flow to average between $150 million and $200 
million. 

Total debt as of March 31, 2012 was $564 million, with $440 million outstanding 
under a senior unsecured term loan facility which matures September 2016 and 
$124 million in senior unsecured notes due June 2017.

Fitch affirms Broadridge as follows:
--Issuer Default Rating (IDR) at 'BBB+';
--Senior unsecured revolving credit facility at 'BBB+'; 
--Senior unsecured debt at 'BBB+'.
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