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04 Mar 2014
New York, March 04, 2014 -- Moody's Investors Service assigned a Baa2 rating to Pitney Bowes,
Inc.'s ("Pitney Bowes") proposed $350 million senior unsecured
notes due 2024. The company intends to use the net proceeds for
general corporate purposes, which includes debt refinancing.
The rating outlook remains stable.
With the proceeds of this debt issue Pitney Bowes' will have prefunded
debt maturing in 2015 and, when combined with cash and anticipated
cash flow should cover a major portion of the 2016 maturities.
There will be steady debt maturities for the next several years.
RATINGS RATIONALE
Pitney Bowes is the leader in postal metering, yet faces challenges
from: 1) the secular decline in traditional mail delivery that will
steadily shrink the installed base of equipment, and 2) online providers
who will pressure pricing in its Small and Mid-Sized Business ("SMB")
segment. The SMB segment contributes meaningfully to Pitney Bowes'
profit through the receivables financing programs that Pitney Bowes offers.
While very profitable, equipment financing also weighs on Pitney
Bowes' credit profile due to the ongoing need to refinance the term
debt maturities, and manage the finance assets.
Moody's expects an improvement in the company's operating
margin to around 19%, from about 15% historically,
following the sale of its labor intensive management services business.
However, free cash flow generation is expected to fall below $100
million over the next year, as the company goes through an operational
restructuring which could yield annual cost savings of up to $170
million by 2016.
Ratings Assigned
Senior Unsecured Notes due 2024 - Baa2
Outlook - Stable
Affirmations:
..Issuer: Pitney Bowes Inc.
.... Issuer Rating, Affirmed Baa2
....Multiple Seniority Shelf, Affirmed
(P)Ba1
....Multiple Seniority Shelf, Affirmed
(P)Baa3
....Multiple Seniority Shelf, Affirmed
(P)Baa2
....Senior Unsecured Commercial Paper,
Affirmed P-2
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)Baa2
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa2
The stable outlook reflects our view that despite the anticipated deterioration
of revenues in the core mailing business and operating margins in the
near term, the company is in a position to address its business
challenges, given its leverage position and longer term cash flow
generating potential.
The ratings could be downgraded if debt remains at current levels absent
EBITDA growth, the persistent revenue contraction is not reversed,
the company loses greater market share, or does not maintain annual
free cash flow above $150 million.
The ratings could be upgraded if we see tangible progress in stemming
the ongoing revenue erosion and stabilization of operating margins,
makes tangible progress in addressing annual debt maturities and maintains
adjusted debt/EBITDA leverage in the low 2 times levels.
Based in Stamford, CT, Pitney Bowes is a leading global provider
of integrated mail, messaging and document management solutions
that includes postage meters, mailing equipment and related document
messaging services and software, mail and marketing services.
The principal methodology used in this rating was the Global Technology
Hardware published in October 2010. Please see the Credit Policy
page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
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
SUBSCRIBERS: 212-553-1653
Robert P 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 rates Pitney Bowes' new senior unsecured notes Baa2; outlook stable
No Related Data.
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