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Rating Action:

Moody's assigns Baa3 rating to Global Payments' senior unsecured notes issuance

07 May 2020

New York, May 07, 2020 -- Moody's Investors Service ("Moody's") has assigned a Baa3 senior unsecured rating to Global Payments Inc.'s ("Global Payments") proposed offering of senior notes. The outlook is unchanged at stable. The net proceeds from the offering will be used to repay outstanding revolving credit facility balances.

RATINGS RATIONALE

Global Payments is one of the leading operators in the global payment processing industry with net revenue scale of $7.1 billion (pro forma 2019). The merger with Total System Services, Inc (TSYS) completed in 2019 increased diversification and reinforced leading competitive positions. The merchant solutions business (65% of pro forma 2019 revenue) is the largest small and medium merchant (SME) processor, benefiting from strong share trends due to differentiated integrated payments capabilities. Issuer solutions (25% of net revenue) is the largest credit card issuer processor, characterized by high stability and performance visibility. Business and consumer solutions (11% of net revenue) is the second-largest prepaid card program manager. The three business lines are complementary, and the merger provides meaningful revenue and cost synergy opportunities. Prior to the coronavirus outbreak, the payment processing industry in the US and globally was growing above the rate of GDP growth with support from positive secular trends, and Global Payments was growing above the industry's rate of growth.

The coronavirus outbreak is having a significant adverse impact on Global Payments' financial performance. Moody's regards the coronavirus outbreak as a social risk under the ESG framework. The merchant solutions business is affected by the unprecedented disruption of commerce during the lockdown period, and is likely to experience a meaningful revenue decline which will be modestly greater than for the industry as a whole due to its high SME merchant exposure, offset in part by continued market share gain. The issuer processing business is likely to be relatively stable due to a revenue model largely based on accounts on file and transaction counts rather than payment volumes. The consumer business will be impacted by the recessionary economic conditions but will be supported by the disbursement of stimulus funds into prepaid accounts. The impact of the revenue decline in 2020 will be partially offset by cost savings and continued realization of TSYS merger synergies. Moody's expects revenues to partially rebound in 2021 in line with macroeconomic assumptions and in light of Global Payments' solid competitive positioning in its business lines.

Consistent with management's public financial policy commitments, Moody's expects the company to manage capital allocation to maintain total leverage of around 3x (Moody's definition). Leverage will exceed this target in 2020, but we expect it to decline in 2021. The company benefits from strong liquidity with available cash balances of $1.3 billion as of March 2020 and a $3 billion revolver with outstanding balances of about $400 million pro forma for the pending issuance of senior notes and the repayment of outstanding revolver balances. Moody's expects Global Payments to generate positive free cash flow after restructuring charges and dividends in the second quarter of 2020 at the trough of the lockdown period volume disruption, with free cash flow increasing gradually over the course of 2020 and into 2021.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The stable outlook reflects Moody's expectation of sustained solid positive free cash flow through the recessionary period, gradual improvement in revenues in the second half of 2020 and in 2021, and total leverage returning to about 3x in 2021. The ratings could be upgraded if Global Payments generates consistent solid organic growth and progresses TSYS integration as anticipated while maintaining a consistently balanced financial policy. The ratings could be downgraded if revenue recovery in the second half of 2020 and 2021 does not materialize, or if Moody's adjusted total leverage is sustained above 3.5x.

The following rating actions were taken:

Assignments:

..Issuer: Global Payments Inc.

....Senior Unsecured Notes, Assigned Baa3

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

With net revenues for the pro forma twelve month period ended December 2019 of $7.1 billion, Global Payments is a leading diversified provider of payment processing services.

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. We expect that credit quality around the world will continue to deteriorate, especially for those companies in the most vulnerable sectors that are most affected by prospectively reduced revenues, margins and disrupted supply chains. At this time, the sectors most exposed to the shock are those that are most sensitive to consumer demand and sentiment, including global passenger airlines, lodging and cruise, autos, as well as those in the oil & gas sector most negatively affected by the oil price shock. Lower-rated issuers are most vulnerable to these unprecedented operating conditions and to shifts in market sentiment that curtail credit availability. Moody's will take rating actions as warranted to reflect the breadth and severity of the shock, and the broad deterioration in credit quality that it has triggered.

For more information on research on and ratings affected by the coronavirus outbreak, please see moodys.com/coronavirus.

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 at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

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 ratings tab on the issuer/entity page for the respective issuer on www.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 ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.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://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.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 ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Peter Krukovsky
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Lenny J. Ajzenman
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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