S&P Affirms Dell's BB+ Rating, Puts EMC On CreditWatch Negative

Standard & Poor's on Monday affirmed its BB+ corporate credit rating on Dell Inc. but placed its senior secured and senior unsecured ratings on CreditWatch negative, meaning it could downgrade them in the near term. The rating agency also placed EMC Corp.'s A rating on CreditWatch negative. The moves came after EMC agreed to be acquired by Michael Dell and partners in a $67 billion cash-and-stock deal. S&P expects the deal to be financed with a mixture of cash on hand, debt issuance, equity from its current owners and Singaporean wealth fund Temasek, and a tracking stock to track VMware's stock price, although details have not been disclosed. "The affirmation of the corporate credit rating on Dell reflects the company's improved business risk profile as we view the acquisition of EMC strengthens Dell's existing product portfolio to include market leadership positions in PC, servers, storage, and virtualization software, enhances Dell's position as a critical IT business partner with its customers and supply chain partners, improves the company's profitability profile as a result of better product mix, and also enables the opportunities for revenue and cost synergies," said S&P credit analyst David Tsui. "Offsetting this factor is our view that the transaction will weaken the company's financial risk profile due to higher debt leverage."