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Rating Action:

Moody's assigns Baa1 rating to Wolters Kluwer's proposed notes

15 Sep 2022

Madrid, September 15, 2022 -- Moody's Investors Service ("Moody's") has today assigned a Baa1 rating to the proposed €500 million senior unsecured notes due 2026 to be issued by Wolters Kluwer N.V. ("Wolters Kluwer" or "the company"), a leading provider of information services and solutions globally to professionals in the health, tax and accounting, risk and compliance, and finance and legal sectors. The outlook on the rating is stable.

The net proceeds of the new notes will be used for general corporate purposes.

A full list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

Wolters Kluwer's Baa1 senior unsecured rating reflects the company's strong global market positions and its steady organic revenue growth, underpinned by its subscription-based revenues. Its business model should be fairly resilient under the current challenging macroeconomic environment because of the mostly digital and recurring nature of its revenue (approximately 80% of total revenues).

The rating also reflects Wolters Kluwer's (1) well-diversified portfolio across businesses and geographies, which translates into stable and predictable operating performance; (2) improving operating margin, as a result of economies of scale and an effective cost-saving programme; (3) track record of satisfactorily delivering new and innovative solutions to its customers; (4) continued prudent financial policy, with its M&A strategy focused on the acquisition of niche market entities that complement its own product suite; and (5) strong free cash flow generation after dividends.

In August 2022, the company released its H1 2022 results with solid organic revenue growth of 7% driven strong performance at all divisions. The company raised its adjusted operating profit margin guidance for the full year 2022 to 26.0%-26.5% from 25.5%-26.0%, while maintaining the Adjusted free cash flow guidance at €1,025 million -€1,075 million. At the same time, the divisional organic revenue growth outlook was raised for the Tax & Accounting and Legal & Regulatory divisions. Finally, the company decided to upsize its share buyback program for 2022 to €1.0 billion from €600 million.

In 2022, Moody's expects Wolters Kluwer to report mid-single digit organic revenue growth and margin improvement in line with the company guidance. The company will continue to report strong credit metrics, such as Moody's-adjusted gross debt/EBITDA of around 2.2x, retained cash flow (RCF)/net debt of 37%, and free cash flow (FCF)/net debt above 20%, broadly unchanged compared to 2021 levels.

Despite the challenging macroeconomic conditions, Moody's expects Wolters Kluwer to deliver a fairly resilient operating performance on the back of strong demand of its cloud based expert solutions, the company's expansion into adjacent segments and new geographies, and the integration of the high-growth businesses acquired in the last years.

As of June 2022, the company had a cash balance of c.€1.0 billion, a fully available €600 million multicurrency revolving credit facility (RCF) maturing in July 2025, and a €1 billion euro commercial paper programme, of which €100 million are outstanding. The RCF has a 3.5x net debt/EBITDA covenant, but headroom under the covenant is comfortable (1.3x as of June 2022). Following the proposed issuance, the company's cash balances will materially strengthen ahead of the €700 million senior unsecured bond maturity in March 2023.

RATIONALE FOR THE STABLE OUTLOOK

The stable outlook on the rating reflects Moody's expectation that Wolters Kluwer's operating performance will be resilient in the current global macroeconomic environment, and that it will maintain a disciplined approach towards debt-financed acquisitions so that its financial ratios remain sustainably and comfortably within the parameters for the Baa1 rating category.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

Upward pressure on the rating would require the company to sustain its solid operating performance while maintaining gross debt/ EBITDA (Moody's-adjusted) below 2.0x, retained cash flow/net debt (Moody's-defined) at or above 25% and FCF/net debt in the midteens in percentage terms.

Downward pressure on the rating could occur if the company's gross debt/EBITDA (Moody's-adjusted) rises above 3.0x, retained cash flow/net debt (Moody's-defined) falls below 20% or FCF/net debt falls below 10%.

LIST OF AFFECTED RATINGS

Assignment:

..Issuer: Wolters Kluwer N.V.

....Senior Unsecured Regular Bond/Debenture, Assigned Baa1

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was Business and Consumer Services published in November 2021 and available at https://ratings.moodys.com/api/rmc-documents/356424. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

COMPANY PROFILE

Wolters Kluwer is a global leader in professional information, software solutions, and services for the health, tax & accounting, governance, risk & compliance, and legal & regulatory sectors. The company generated €4.77 billion in revenue and €1.2 billion in adjusted operating profit in FY 2021.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of  the guarantor entity.  Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.

Agustin Alberti
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid, 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Ivan Palacios
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid, 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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