Feb 5 - Fitch Ratings has downgraded Dell Inc.'s (Dell) ratings as
--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
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.