S&P may change Yahoo's debt rating on Microsoft bid

NEW YORK (Reuters) - Standard & Poor's on Friday said it may change its debt rating on Yahoo Inc, citing Microsoft Corp's bid to buy Yahoo for $44.6 billion.

If Yahoo accepts Microsoft's offer, S&P said it is likely to raise Yahoo's rating, as Microsoft is "clearly a stronger credit than Yahoo, even after this potential transaction."

However, S&P said it is concerned that Yahoo could reject Microsoft's bid and try to sway its shareholders through a special one-time dividend or large share repurchases funded by debt.

"Depending on the magnitude, either of these actions could result in Standard & Poor's lowering its rating on the company," the rating agency said in a statement.

S&P currently rates Yahoo "BBB-minus," the lowest investment-grade rating.

Yahoo said on Friday its board will evaluate the unsolicited offer, which would be the biggest Internet deal since the Time Warner-AOL merger.

(Reporting by Dena Aubin; Editing by Dan Grebler)