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Rating Action:

Moody's assigns Ba3 ratings to NCR's new senior notes; downgrades CFR to Ba2

04 Dec 2012

About $1.1 billion of debt rated

New York, December 04, 2012 -- Moody's Investors Service has assigned Ba3 ratings to NCR's new $500 million notes due 2021. Moody's also downgraded NCR Corporation's ("NCR") corporate family and probability of default ratings to Ba2 from Ba1. In addition, Moody's downgraded the ratings on the existing senior unsecured notes to Ba3 from Ba2. This rating action concludes a review initiated on November 29, 2012, which was prompted by NCR's announcement that is acquiring Retalix Limited ("Retalix"), for net cash consideration of $650 million, to be funded with a combination of the new debt issuance and balance sheet cash. The outlook is stable.

Rating Actions:

$500 MM senior unsecured notes due 2021 assigned Ba3, (LGD-4, 62%)

$600 MM senior unsecured notes due 2022 downgraded to Ba3, (LGD-4, 62%) from to Ba2, (LGD-4, 65%)

Corporate Family Rating downgraded to Ba2 from to Ba1

Probability of Default Rating downgraded to Ba2 from to Ba1

Outlook: Stable

RATINGS RATIONALE

NCR's Ba2 CFR reflects the company's high debt balances relative to its historic levels, resulting from the debt taken on to close the Retalix acquisition, to reduce its domestic pension liability and for the Radiant acquisition in 2011. Further, the Retalix acquisition will add a layer of execution risk to the management team still working on integrating the 2011 acquisition of Radiant Systems. In addition, competitor innovation, challenging macroeconomic forces and technology changes may impact the sales of the company's products in the future. The Ba2 rating also recognizes stable recurring revenue stream from long-term maintenance contracts that result from the strong global market position across its core financial self-service and retail store point of sale businesses, and good geographic and customer diversification. Additionally, the rating is supported by the company's expansion into higher growth, higher margin hospitality product lines and its exit from the underperforming entertainment business, which was consuming cash. The rating also takes into account NCR's potential for stable free cash flow generation and a good liquidity profile.

Despite the higher leverage, the Retalix acquisition is generally seen as a positive for NCR as it is consistent with management's stated strategy to broaden the scope and enhance the competitiveness of its product portfolios. Pro forma for the acquisition NCR will have over $6 billion in revenue and the additional scale will provide opportunities to improve operating margins. The Retalix acquisition strengthens NCR's position in the retail industry, and builds upon the integration of Radiant Systems into the NCR portfolio. NCR also expects to use Retalix's software to accelerate the development of NCR's enterprise software platform, creating new software modules that can be used across the company's retail industry offerings and grow a platform to leverage across NCR's financial, travel and hospitality industries on a global scale.

What Could Change the Rating - UP

NCR's rating could face upward pressure if the company successfully integrates recent acquisitions and demonstrates sustained revenue growth, operating margin improvements and delivers consistent levels of free cash flow with lower volatility. The rating could also be considered for an upgrade if the company maintains adjusted leverage below 3.5 times. Additionally, NCR would need to continue to execute effectively on new product and technology introductions as measured by market share gains in financial, retail and hospitality business segments across business cycles.

What Could Change the Rating - DOWN

NCR's, ratings could be downgraded if NCR fails to reduce leverage meaningfully, or should leverage increase above 4.5 times. Ratings could also face pressure if NCR does not maintain free cash flow above $200 million a year or does not overcome integration challenges. Additionally, if operating performance does not improve as anticipated, due to increased business risk, loss of market share in key business segments, or a change in NCR's competitive position, the rating may be downgraded.

The principal methodology used in rating NCR Corporation was the Global Technology Hardware Industry Methodology published in September 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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Gerald Granovsky
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
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Robert Jankowitz
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns Ba3 ratings to NCR's new senior notes; downgrades CFR to Ba2
No Related Data.
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