NEW YORK--(BUSINESS WIRE)--Verisk Analytics, Inc.'s (Verisk) 'BBB+' Long-Term Issuer Default Rating (IDR) is not affected by the $500 million incremental share repurchase program approved by the company's board of directors, according to Fitch Ratings.
As of September 2016, Verisk had $279.5 million remaining under its existing $2.3 billion repurchase program. Fitch believes Verisk has sufficient free cash flow (FCF) generation to remain within the company's target leverage of 2.5x and support a modest level of buybacks. As of the last-12-months (LTM) ended Sept. 30, 2016, Fitch estimates Verisk's total leverage at 2.4x (pro forma for the sale of its healthcare analytics business).
As Fitch expected, Verisk successfully reduced leverage below 2.5x following the closing of the Wood Mackenzie acquisition in May 2015 (pro forma closing leverage was 3.5x). Verisk accomplished this using a combination of FCF and proceeds from the $820 million sale of its healthcare analytics business ($675 million of after-tax cash proceeds, of which $600 million was received at closing) to repay $860 million of bank debt. Fitch notes this is in line with management's demonstrated track record of de-levering to target levels following debt-funded acquisitions.
As of Sept. 30, 2016, the company had solid liquidity consisting of $168.2 million in cash, and $1.5 billion available under its $1.5 billion RCF due May 2020. Verisk's liquidity position and overall financial flexibility is supported by Verisk's FCF profile, with the company reporting $408 million of FCF as of LTM Sept. 30, 2016. Verisk has no material maturities until 2019 when $250 million in unsecured notes is due.
Fitch could upgrade the ratings if the company were to return to its previous leverage target of 2x (with a rationale for such target) and FCF to adjusted debt sustaining in the 20% to 25% range. Fitch expects the company to achieve the latter in the near term.
Fitch would consider downgrading Verisk if expectations were for leverage to be sustained above 2.5x on an other than temporary basis, possibly resulting from material share buyback activity, additional debt-funded acquisitions, or a structural decline in organic growth or margins.
Fitch currently rates Verisk as follows:
--Long-term IDR 'BBB+';
--Short-term IDR 'F2';
--Revolving credit facility 'BBB+';
--Senior unsecured notes 'BBB+'.
Additional information is available on www.fitchratings.com.
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