TEXT - Fitch cuts Dell long-term issuer default rating to 'BB+'
Feb 5 - Fitch Ratings has downgraded Dell Inc.'s (Dell) ratings as follows: --Long-term Issuer Default Rating (IDR) to 'BB+' from 'A'; --Bank credit facilities to 'BB+' from 'A'; --Senior unsecured debt at 'BB+' from 'A'; --Short-term IDR to 'B' from 'F1'; --Commercial paper (CP) to 'B' from 'F1'. Fitch has placed the ratings on Rating Watch Negative pending the conclusion of Dell's proposed leveraged buyout (LBO). Approximately $12 billion of debt is affected by Fitch's action, including Dell's undrawn revolving credit facilities with aggregate capacity of $3 billion. SENSITIVITY/RATING DRIVERS The downgrades and placement on Rating Watch Negative reflect Dell's announcement that it will be acquired by Michael Dell and Silver Lake in a LBO transaction, which values the equity at $13.65 per share or $24.4 billion. The transaction remains subject to a 45-day go shop period and shareholder approval. The transaction is expected to close by the end of July 2013. Key details of the financing package for the proposed LBO have yet to be disclosed, but Fitch continues to expect pro forma leverage in the 3.5x - 4.5x range, as previously indicated in our press release dated Jan. 17, 2013. This would likely result in a long-term IDR in the mid to high single 'B' range. A 'BB-' rating is a possibility based solely on leverage at the very low end of the range. However, various other factors need to be considered, including the highly competitive environment in which Dell operates, the uncertain macro economy, public sector weakness, reduced financial flexibility to pursue future acquisitions, a nascent track record of its recently acquired enterprise portfolio, and the potential to burn cash in down cycles due to its negative working capital position.
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