TEXT-S&P: Nuance Communication '4' recovery rtg remains unchanged
Oct 15 - Standard & Poor's Ratings Services said today that is has affirmed its 'BB-' issue-level rating on Nuance Communication's $350 million add-on senior unsecured notes due 2020. The '4' recovery rating on the company's senior unsecured notes remains unchanged. The '4' recovery rating indicates expectations for average (30%-50%) recovery in the event of a payment default. The company intends to use the proceeds from the $350 million senior unsecured notes to repay approximately $144 million of senior secured first-lien term loan due 2013 and for general corporate purposes. The remaining first-lien term loan outstanding is $493 million and is due 2016. The 'BB+' rating on the company's first-lien credit facilities and the '1' recovery rating on that debt 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 also 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 proposed $350 million senior unsecured note issuance, operating lease-adjusted total debt to EBITDA will be in the low-5x 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 4x or below 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, published Aug. 27, 2012, on RatingsDirect.) RELATED CRITERIA AND RESEARCH -- Issuer Ranking: Global Technology Ratings, Strongest To Weakest, Sept. 27, 2012 -- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012 -- Industry Economic Outlook: Despite Economic Headwinds, Global Technology Shows Balanced Ratings Trend, July 9, 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 -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 RATINGS LIST Nuance Communications Inc. Corporate Credit Rating BB-/Stable/-- Issue Rating Unchanged Nuance Communications Inc. Senior Unsecured $1.050 bil. nts due 2020 BB- Recovery Rating 4 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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