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Investing.com -- Moody’s Ratings has upgraded the long-term issuer and senior unsecured debt ratings of Nasdaq, Inc. to Baa1 from Baa2, while also affirming its Prime-2 commercial paper rating. Additionally, Moody’s assigned Nasdaq a (P)Baa1 senior unsecured shelf rating, a (P)Baa2 subordinate shelf rating, and a (P)Baa3 preferred stock non-cumulative shelf rating. Nasdaq’s outlook remains stable.
The upgrade in ratings is a reflection of Nasdaq’s increased scale and improved debt leverage due to its varied business activities. The enduring credit benefits from its highly recurring revenue stream from non-trading businesses, robust profitability, and a strong market position in its core exchange activities have also contributed to the upgrade. Nasdaq has successfully reduced its Moody’s-adjusted pro-forma debt/EBITDA leverage to 3.9x by the end of 2024 from 4.6x at the end of 2023, following its acquisition of Adenza in November 2023.
Moody’s expects this ratio to further improve to approximately 3.3x and 3.0x by the end of 2025 and 2026 respectively, provided there are no additional debt-funded acquisitions. Gabriel Hack, a Moody’s Ratings Assistant Vice President-Analyst, stated that Nasdaq’s creditworthiness assessment includes its periodic increases in debt leverage in association with acquisitions. However, the associated credit risks are offset by its proven ability to successfully integrate acquisitions, generate strong organic cash flows, and its commitment to de-leverage quickly after such acquisitions.
The assigned (P)Baa2 subordinate shelf rating and (P)Baa3 preferred stock non-cumulative shelf rating reflect a standard notching of one and two notches, respectively, below the Baa1 senior unsecured rating. This is based on the expectation of a higher severity of loss for subordinated creditors and preferred stockholders.
The stable outlook for Nasdaq reflects the anticipation of continued pre-tax earnings growth due to organic growth in its Solutions businesses, while maintaining strong pre-tax margins. The outlook also factors in the expectation that any leveraging acquisition activity will be followed by timely deleveraging.
Nasdaq’s long-term ratings could be upgraded if the company adopts a more conservative financial posture, including a commitment to a lower level of peak leverage and a shorter deleveraging period for any future acquisitions. An upgrade could also be possible if the firm significantly increases its scale and profitability on an organic basis.
On the other hand, Nasdaq’s long-term ratings could face a downgrade if it shows a notably looser financial policy, including a tolerance for maintaining debt leverage above 4.0x, produces consistently weaker and less stable earnings and a lower pretax margin, undertakes additional acquisitions that introduce significant business or strategic risks, or experiences a significant operational failure that damages the company’s franchise.
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