Activision Blizzard Inc. Upgraded To #BBB+# On Strong Cash Flow And Minimal Leverage Outlook Stable

Stocks and Financial Services Press Releases Wednesday March 21, 2018 09:32
CHICAGO--21 Mar--S&P Global Ratings
CHICAGO (S&P Global Ratings) March 20, 2018--S&P Global Ratings today raised its corporate credit rating on Activision Blizzard Inc. to 'BBB+' from 'BBB'. The rating outlook is stable.
At the same time, we raised our issue-level rating on Activision's senior unsecured debt to 'BBB+' from 'BBB'.

The upgrade is based on our expectation that Activision's leverage will remain low in 2018 and 2019, supported by steady growth in revenue and cash flow and a conservative financial policy. The company's financial position continues to improve and its cash and cash equivalents now exceed its debt level. Recent U.S. tax reform also reduces the company's tax rate and enables Activision to more efficiently repatriate cash to the U.S. We expect that leverage, which was 0.2x at the end of 2017, will remain low due to the company's strong cash flow generation and portfolio of leading franchise titles, and the growth in its ancillary revenue streams from eSports.

The stable rating outlook reflects our expectation that Activision will maintain leverage below 1.5x despite fluctuations related to the success and timing of its game releases. We also expect that Activision will be able to maintain the vitality of its key franchise titles, including "Call of Duty," "World of Warcraft," and "Candy Crush."

We could lower the corporate credit rating if the company experiences meaningful performance deterioration relative to our expectation (likely due to weakness in key franchise titles). Additionally, a downgrade could occur if Activision is unable to maintain its adjusted debt leverage below 1.5x given the potential for fluctuations in leverage from acquisitions and the success and timing of releases.

We could raise the rating if Activision significantly reduces its revenue concentration, becoming less reliant on a small number of key titles and revenue from consumer purchase of games and related services. An upgrade would also likely entail the company maintaining its conservative financial policies and low leverage level.

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