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21 Oct 2010
$1.5 Billion of debt securities affected
New York, October 21, 2010 -- Moody's Investors Service assigned a A2 rating to the proposed $1.5
billion senior unsecured debt offering by eBay Inc. The outlook
We anticipate that proceeds from the debt offering will also be used for
general corporate purposes, which may include working capital,
acquisitions, and capital expenditures.
The A2 rating reflects eBay's solid debt protection measures that are
derived from its strong market positions in its online marketplaces and
payments segments. The rating also considers the company's relative
scale in terms of the number of users, the networking stickiness
of its various auction sites and online payment offerings, as well
as the company's strong brand awareness. These strengths,
combined with solid business execution, "should contribute to continued
strong profitability, significant free cash flow generation,
and ample financial flexibility", said Moody's senior vice president,
Richard Lane. We anticipate that very low financial leverage and
strong liquidity will allow the company to continue to maintain a strong
While these strengths and overall debt protection measures could suggest
an even higher rating, the rating is tempered by a number of factors,
including the inherent risks and uncertainties that are attendant to the
internet technology sector, the evolving nature of e-commerce
and the relatively low barriers to entry and potentially disruptive competitive
challenges that could emerge over time. While Moody's believes
that eBay's business risk is moderate to low over the near term,
there remain uncertainties as to how e-commerce technology,
platforms, and even regulation will evolve over the intermediate
to longer term.
Pro forma the proposed debt offering, eBay's debt to EBITDA
approximates 0.6 times using Moody's standard analytic adjustments.
This is consistent with our expectation that management will maintain
leverage at less than 1.0 times.
We expect that eBay's liquidity profile will remain solid. As of
the quarter ended September 2010, eBay had cash, cash equivalents
and short-term investments of $5.4 billion.
Moody's expects eBay to maintain significant balance sheet liquidity,
reflecting the company's conservative financial philosophy and its significant
and steady free cash flow generation, which totaled nearly $2.0
billion over the most recent twelve months.
Notwithstanding eBay's robust overall liquidity, a significant
portion of the company's funds are held outside of the U.S.,
and the majority of its free cash flow generation occurs internationally.
At September 2010, just over $900 million of its cash,
cash equivalents and non-equity investments was held domestically.
We consider the location of eBay's cash when assessing its liquidity position
and accordingly apply haircuts to its offshore cash to reflect the potential
tax implications of repatriation. Even after these haircuts,
eBay's current cash position is significant.
The stable outlook reflects Moody's expectations that eBay will continue
to maintain and defend its strong market positions across a range of e-commerce
platforms. As a result, we expect eBay to generate strong
and stable operating profit and free cash flow and that management will
maintain significant liquidity and financial flexibility, which
is important to contend with changing demands of the e-commerce
sector or to take advantage of market opportunities. The rating
assumes that eBay's flexible cost structure and low financial leverage
will allow the company to continue to maintain a strong credit profile.
Rating assigned include:
Senior unsecured notes -- rated A2
Moody's subscribers can find additional information in the eBay Credit
Opinion published on Moodys.com.
The last rating action was on August 19, 2010 when Moody's raised
eBay's issuer rating to A2 from A3
The principal methodology used in rating eBay Inc. was Global Business
and Consumer Service Industry rating methodology published in October
2010. Other methodologies and factors that may have been considered
in the process of rating this issuer can also be found on Moody's website.
eBay Inc., founded in 1995, is headquartered in San
Jose, California. With over $9 billion of revenue
for the twelve months ended September 2010, eBay Inc. is
a leading worldwide provider of online marketplaces for the sale of goods
and services online payments services to a diverse community of individuals
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service's information,
confidential and proprietary Moody's Analytics' information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Richard J. Lane
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns A2 rating to eBay's senior unsecured debt.
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