S&P DOWNGRADES HOUSTON-BASED BMC SOFTWARE TO JUNK STATUS

S&P DOWNGRADES HOUSTON-BASED BMC SOFTWARE TO JUNK STATUS

By Michael Calia, July 30, 2013, MarketWatch

Standard & Poor's Ratings Service on Monday downgraded enterprise software company BMC Software Inc.'s rating to junk territory, citing a "substantial" amount of debt financing related to its acquisition by a group led by Bain Capital and Golden Gate Capital.

"The downgrade reflects our assessment that the going-private transaction will result in a deterioration in BMC's financial risk profile," the ratings firm said.

S&P downgraded BMC's corporate credit rating to B-plus, four levels into junk territory, from triple-B-plus. S&P removed BMC from the negative CreditWatch status it had assigned the software company in May following the approval of a $6.9 billion private-equity buyout led by Bain and Golden Gate Capital.

The go-private deal is expected to close later this year.

The company's private-equity ownership likely means it will not be able to reduce debt at sustained levels, diminishing potential for an upgrade, S&P added. The ratings firm said it considers BMC's risk profile "highly leveraged."

S&P maintained its "stable" outlook on BMC, however, pointing to the software company's consistency and strength across market segments.

Shares were up by four cents to $45.99 after hours. Through the close, the stock is up 16% year-to-date.

Write to Michael Calia at michael.calia@wsj.com