Oct. 1, 2009 (Business Wire) -- Following the close of FIS Inc.'s (FIS) acquisition of Metavante Technologies Inc. (Metavante) Fitch Ratings has assigned the following ratings to Metavante:
--Issuer Default Rating (IDR) 'BB+';
--$800 million senior secured term loan B 'BBB-';
Fitch has affirmed the following ratings for FIS:
--IDR at 'BB+';
--$900 million secured revolving credit facility (RCF) at 'BBB-';
--Senior secured term loan A at 'BBB-'.
The Rating Outlooks for both issuers are Positive. FIS was formerly known as Fidelity National Information Services, Inc.
The Metavante secured term loan is supported by cash from operations at Metavante as well as a senior unsecured guarantee from FIS. While Fitch views this position in the capital structure as being structurally subordinate to senior secured debt at FIS, Fitch believes that Metavante's steady EBITDA and free cash flow, much of which is generated by recurring revenue under long-term contracts, support a 'BBB-' rating. Fitch estimates that Metavante generated EBITDA of $525 million and free cash flow of $190 million in the latest 12 months (LTM) period ending June 30, 2009. Fitch expects to monitor cash flow at Metavante with regard to its level of support for the senior secured term loan given the potential for a portion of cash flow and EBITDA at Metavante to shift to FIS subsidiaries as operations of the two companies are integrated.
Senior secured debt at FIS, estimated to be $2.8 billion pro forma for the acquisition, is supported by cash from operations at legacy FIS subsidiaries, as well as a senior unsecured guarantee from Metavante. Fitch estimates that FIS (ex-Metavante) generated EBITDA of $870 million and free cash flow of $426 million in the LTM period ended June 30, 2009.
On a combined pro forma basis, Fitch estimates that FIS produced EBITDA of $1.4 billion and free cash flow of $616 million in the LTM period. This does not include potential cost savings of up to $260 million annually expected to be generated by the integration of operations, the majority of which is expected to be realized by the end of 2010. Pro forma leverage is estimated at 2.6 times (x) or 3.1x when adjusted for operating lease expense, with interest coverage estimated at 5.5x. The secured term loan at Metavante and bank facility at FIS have identical financial covenants, applicable to consolidated results at FIS, limiting leverage to 3.5x (3.25x beginning March 31, 2010) and requiring minimum interest coverage of 4x.
The Positive Outlook reflects expectations for increased free cash flow and an ability to reduce total leverage (total debt to total operating EBITDA) to below 2.5x and closer to 2.0x in 2010. Fitch believes the acquisition of Metavante also will provide the company with meaningful incremental customer and product diversification which further supports the credit.
