Microsoft's Triple-A Credit Under Review At Moody's After LinkedIn Acquisition

Moody's Investors Service said Monday that it was reviewing Microsoft Corp.'s triple-A rating (Aaa) for a possible downgrade, following the technology giant's bid to buy LinkedIn Corp. for $26.2 billion. Microsoft's short-term rating was affirmed at Prime-1, and is not currently under review. Moody's said although buying LinkedIn could provide meaningful benefits to Microsoft's cloud-based services platform, the rating agency said funding the acquisition entirely with debt will increase gross debt to 2.0 times earnings before taxes depreciation and amortization (EBITDA), a measure of cash flow. It would also increase leverage to more than the 1.5 times that Moody's had previously said could put pressure on the technology company's ratings. If Microsoft's rating is lowered, Johnson and Johnson would become the only company that Moody's rates with a Aaa rating. The stock slumped 2.4% in afternoon trade, while LinkedIn's stock shot up 47%. Year to date, shares of Microsoft have lost 9.4%, LinkedIn gave 15% and the Dow Jones Industrial Average has tacked 2.2%.