Rating Agencies Upgrade Unisys - Analyst Blog

Standard & Poor's (S&P) Ratings Services recently upgraded its corporate credit rating on Unisys Corporation (UIS) to B+ from B driven by improved operating performance.

The ‘B’ rating from S&P indicates that the financial situation of the company will vary noticeably and continues to be non-investment grade.

Nevertheless, S&P suggested that the company now has adequate liquidity and positive cash flows will help combat the decline in revenues.

Earlier, Moody's Investors Service also raised its corporate rating on Unisys leading to a slight decline in the probability of default which now stands at B1 from the previous level of B3.

Moody's upgraded Unisys' senior secured first lien notes due 2014 to "Ba1" from "Ba3," its senior secured second lien notes to "Ba2" from "Ba3" and its senior unsecured notes due 2012, 2015 and 2016 to "B2" from "Caa1."

The upgrade in rating comes in the wake of reduced debt and improved operating performance. As of Jun 30, 2010, Unisys had $836.4 million of total long-term debt, down from $911.7 million on Dec 31, 2009. Both the rating agencies currently have a stable outlook for Unisys.

Management at Unisys is making constant efforts to reduce its high level of debt. In 2009, Unisys launched private debt exchange offers to address $300 million of debt maturing in March 2010. Subsequently, the company completed the debt exchange offers and thereby reduced its outstanding debt by approximately $130 million (about 12%). The private debt exchange offers involved the exchange of outstanding unsecured senior notes of the company for secured notes, common stock and cash.

On the other hand, the economic downturn has adversely impacted technology spending. Global IT spending declined significantly in 2009. The credit crunch greatly impacted IT capital purchases, and most companies have trimmed their IT budgets. This in turn has impacted Unisys' top-line.

Over the past two years, Unisys has been taking steps to reduce costs and improve profitability. This includes cutting of jobs to reduce costs, selling non-core businesses, revamping its sales strategy and focusing investments on a few higher-growth areas in the IT market.
 
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