TEXT-S&P revises Nuance notes recovery rating to '4' from '3'
Aug 9 - Standard & Poor's Ratings Services said today that it will revise its recovery rating on Nuance Communications Inc.'s senior unsecured notes to '4' from '3' following the company's announcement that it has upsized its proposed senior unsecured notes due 2020 to $700 million from $600 million. The issue-level rating will remain at 'BB-'. The 'BB+' rating on the company's first-lien credit facilities and the '1' recovery rating on that debt will remain unchanged, reflecting our expectation for very high (90%-100%) recovery in the event of a payment default. Our 'BB-' corporate credit rating and stable outlook on Nuance Communications remain unchanged. Standard & Poor's continues to view Nuance Communications' financial risk profile as "significant," highlighted by its acquisitions growth strategy. Pro forma for the upsized $700 million senior unsecured note issuance, operating lease-adjusted total debt to EBITDA is likely to be about 4.9x at close, high for a significant financial risk profile and primarily a result of deferred revenue recognition from recent acquisitions not allowed according to GAAP. We expect leverage to decline to below 4x over the next year, as deferred revenue from recent acquisitions is recognized, and as Nuance Communications generates revenue and EBITDA growth organically and through contributions from potential future acquisitions. Nuance Communications is a provider of voice and language solutions for businesses and consumers globally. (For the complete corporate credit rating rationale, see the research update on Nuance Communications, published Aug. 7, 2012, on RatingsDirect.) RELATED CRITERIA AND RESEARCH -- Industry Economic Outlook: Despite Economic Headwinds, Global Technology Shows Balanced Ratings Trend, July 9, 2012 -- Issuer Ranking: Global Technology Ratings, Strongest To Weakest, June 29, 2012 -- Performance For U.S. Semiconductor Equipment Makers Has Been Volatile, But Ratings Remain Stable, June 11, 2012 -- Top 10 Investor Questions: How Will The Global Technology Industry Fare Amid An Economy In Flux?, April 26, 2012 -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011 -- Key Credit Factors: Methodology And Assumptions On Risks In The Global High Technology Industry, Oct. 15, 2009 -- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, May 27, 2009 -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 RATINGS LIST Nuance Communications Inc. Corporate Credit Rating BB-/Stable/-- Ratings Unchanged; Recovery Rating Revised Nuance Communications Inc. To From Senior Unsecured BB- BB- Recovery Rating 4 3 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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