Motorola Solutions Inc. #BBB-# Rating Outlook Revised To Negative On Plan To Acquire Avigilon Corp.

Stocks and Financial Services Press Releases Friday February 2, 2018 09:30
NEW YORK--2 Feb--S&P Global Ratings

NEW YORK (S&P Global Ratings) Feb. 1, 2018-- S&P Global Ratings today revised its outlook on Chicago-based Motorola Solutions Inc. to negative from stable. At the same time, we affirmed our 'BBB-' corporate credit rating on the company.

The outlook revision is based on our expectation that Motorola's pro forma adjusted debt to EBITDA will increase to the high-3x area following the transaction from the mid-3x area, above our current low-3.0x threshold for the 'BBB-' rating. While we believe that Motorola has good prospects to reduce leverage over the next couple of years by paying down debt through free operating cash flow (FOCF), the company has demonstrated a willingness to finance acquisitions and shareholder returns with new debt, which could make it challenging to maintain leverage in the low-3x area over the next few years.

The negative outlook reflects our view that pro forma leverage in the high-3x area is high for the rating level and uncertainty around the ultimate timing of deleveraging. While we expect that the acquisition of Avigilon coupled with stable operating performance in its core markets should enable Motorola to delever to the low-3x area over the next 18 months, the company has been fairly aggressive funding shareholder returns and acquisitions through debt issuance over the last three years.

Over the next 18 to 24 months, we could revise the outlook to stable if the company maintains operating growth, and reduces debt to EBITDA to the low-3x area.
Over the next 18 to 24 months, we could downgrade the company if operating weakness or continuation of aggressive financial policy causes debt to EBITDA to remain above the low-3x area.

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