Bats Global Markets Inc. Ratings Raised To #BB+# On Improved Financial Ratings Remain On CreditWatch Positive

Stocks and Financial Services Press Releases Thursday February 16, 2017 08:53
NEW YORK--16 Feb--S&P Global Ratings

NEW YORK (S&P Global Ratings) Feb. 15, 2017--, S&P Global Ratings said today it raised its issuer credit and issue ratings on Bats Global Markets Inc. to 'BB+' from 'BB-'. The ratings remain on CreditWatch with positive implications.

"The upgrade reflects recent improvements in the company's financial risk profile." said S&P Global Ratings credit analyst Olga Roman. Bats performed better than we expected in the 12 months ended Dec. 31, 2016, with a strong revenue increase of about 13% year over year. As of Dec. 31, 2016, the company's reported debt significantly declined to $567 million from $688 million a year earlier as a result of mandatory and excess debt repayments. We estimate that the company's debt to EBITDA improved to about 2x and funds from operations (FFO) to debt increased to above 30% as of Dec. 31, 2016, from 3x and 20.2%, respectively, a year before. We expect the company to continue to operate with FFO to debt above 30% and debt to EBITDA around 2x.

In addition, we believe Bats has a solid market position in U.S. and European cash equities and is growing its market share in U.S. equity options, exchange traded funds and foreign exchange products, and has scalable technology platforms. However, despite an increase in fee-based revenues over the past year, the company's revenue still depends heavily on the trading volumes of the U.S. equity markets. Bats is the No. 2 equities market operator in the U.S. and the No. 1 European equities market operator by market share.

We placed our ratings on Bats on CreditWatch with positive implications following CBOE Holdings Inc.'s announcement in September 2016 that it plans to acquire Bats. In our view, this transaction could further improve Bats' financial risk profile by reducing the company's outstanding debt and supporting cash flow generation by lowering interest expenses. Additionally, our ratings on Bats likely will benefit from implicit group support from CBOE holdings. We expect the acquisition to close in the first quarter of 2017.

While the ratings are on CreditWatch, we will gather additional information on the transaction as well as finalize our view of Bats' strategic importance to CBOE. We will resolve the CreditWatch upon the completion of the merger. We could raise the ratings by up to three notches, depending on our ratings on CBOE following the deal closing and our view on Bats' strategic importance to CBOE. Alternatively, in the event acquisition plans are called off, we would consider the major implications for the company's stand-alone strategy. Removing the ratings from CreditWatch and affirming them would be the most likely option at that point.


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