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Global Payments Inc. -- Moody's assigns Baa3 rating to Global Payments' senior unsecured note issuance

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Rating Action: Moody's assigns Baa3 rating to Global Payments' senior unsecured note issuanceGlobal Credit Research - 19 Feb 2021New York, February 19, 2021 -- Moody's Investors Service ("Moody's") has assigned a Baa3 senior unsecured rating to Global Payments Inc.'s ("Global Payments") proposed senior unsecured notes offering. The net proceeds from the offering will be used to redeem existing senior unsecured notes.The following rating actions were taken:..Issuer: Global Payments Inc.....Senior Unsecured Notes, Assigned Baa3RATINGS RATIONALEGlobal Payments is a leading diversified global payment processor, operating in merchant acquiring (63% of net revenue in 2020), issuer processing (25% of revenue) and prepaid program management (11% of revenue) business segments. Each of the company's businesses benefits from strong competitive positioning with leading market share. The Merchant Solutions segment is the largest small and medium (SME) merchant processor, benefiting from market share gains driven by integrated and omnichannel capabilities. The Issuer Solutions segment is the largest credit card issuer processor with high business stability and forward performance visibility. The Business & Consumer Services segment is the second-largest prepaid program manager with a focus on general purpose reloadable (GPR) and demand deposit accounts that support the secular trend of democratization of financial services enabling underbanked consumers.Despite the very difficult macro operating environment for SME merchants in 2020, Global Payments' net revenues declined only 5.2% for the year, and its Moody's adjusted EBITDA remained flat. The Merchant Solutions and Issuer Processing business experienced a decline in the second quarter of 2020 but have rebounded in the second half of the year, and the company's run-rate net revenue in the fourth quarter was down only 1.6% compared to pro forma full year 2019. Moody's views the demonstrated resilience of Global Payments' SME merchant acquiring business in a very difficult SME merchant environment as strongly credit positive. The Business & Consumer Services segment generated revenue growth in 2020, underscoring the essential nature of its services to the customers, with support from stimulus disbursement. Cost synergies from the 2019 merger with Total System Services supported profitability and enabled the company to sustain EBITDA despite the modest revenue decline and the high operating leverage in its business lines. At the end of 2020, Moody's adjusted total leverage stands at 3.2x and liquidity is very strong with available cash of $1.1 billion and free cash flow in 2020 of nearly $1.5 billion.Card payment volumes in the US were flat in 2020, significantly outperforming the decline in personal consumption expenditures (PCE) of about 4% despite deep declines in many heavily carded categories (such as T&E), driven by substantial acceleration of cash displacement and e-commerce. In 2021, Moody's expects PCE to rebound, and expects card payments to again outperform PCE as the affected categories recover from the trough levels and cash displacement is sustained. While the first months of the year may still be difficult, Global Payments' SME merchant customers are likely to gradually experience a recovery in volumes in excess of the overall trends. Additional stimulus funding would provide strong support to the near-term PCE recovery, benefitting all of Global Payments' business lines and in particular its prepaid business. Moody's believes that these factors position Global Payments to have a strong growth year in 2021, though the pace of growth remains uncertain. Revenue growth combined with margin expansion due to high operating leverage will drive meaningful EBITDA growth, resulting in deleveraging and continued strong free cash flow generation.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe stable outlook reflects Moody's expectation of solid EBITDA growth in 2021 driving adjusted total leverage below 3.0x. The ratings could be upgraded if Global Payments generates solid revenue and profitability growth and maintains a consistently balanced financial policy. The ratings could be downgraded if revenues or margins decline, or if Moody's adjusted total leverage is sustained above 3.5x.The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.With adjusted net revenues of $6.75 billion in 2020, Global Payments is a leading diversified financial technology company.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Peter Krukovsky Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Lenny J. Ajzenman Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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