TEXT-S&P: Computer Sciences Corp ratings unaffected by NHS deal
Sept 6 - Standard & Poor's Ratings Services said today that Computer Sciences Corp.'s (BBB/Negative/A-2) recent announcement that it has entered into a binding interim agreement with the U.K. National Health Service (NHS) will not currently affect our ratings or outlook on the company. The interim agreement solidifies CSC's ongoing relationship with the NHS, and removes a significant component of operational and contract uncertainty. However, the negative outlook continues to reflect currently weak EBITDA levels, with limited realized benefits from recently announced cost-reduction actions. Additional concerns include the potential impact of incremental or prolonged weakness in European economic conditions and CSC's federal sector. Nevertheless, we could revise the outlook to stable within the next couple of quarters if CSC demonstrates continued margin improvements and progresses toward its $1 billion cost-reduction goal, while maintaining leverage at or below 2.5x. The ratings on CSC reflect the company's "satisfactory" business profile, supported by its diversified business and geographic mix and expected organizational and cost improvements. We believe CSC will maintain an "intermediate" financial risk profile, incorporating solidly positive free operating cash flow, "adequate" liquidity, and expected operating margin improvements.
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