CSC credit rating takes a hit
By
Nick Wakeman
S&P lowers rating amid poor 2012 results and continuing issues with troubled contracts.
Standard and Poor’s has lowered Computer Sciences Corp.’s credit rating in the wake of poor fiscal 2012 results and concerns of continuing troubles with a large United Kingdom contract.
S&P lowered CSC’s rating from BBB+ to BBB, which means the credit agency believes the company has “adequate capacity to meet financial commitments but more subject to adverse economic conditions.”
Among the conditions S&P cited in its decision are a number of underperforming contracts the company has identified and “prolonged weakness” in the European economy and the U.S. federal sector.
Tops among the troubled contracts are CSC’s issues with the U.K. National Health Service contract that contributed to the company reporting a $4.2 billion loss from continuing operations, S&P said.
CSC also has announced plans to launch $1 billion cost-reduction program.
Overall, S&P is estimating that CSC will have low-to-single-digit revenue declines in fiscal 2013. Excluding the impact of the U.K. contract, the company should have margins of 10 percent, compared to historical margins of 14 percent.