Fitch Upgrades SunGard Data Systems' IDR to 'B+'; Outlook Stable

Business Wire, July 3, 2008

NEW YORK -- Fitch Ratings has upgraded the Issuer Default Rating (IDR) and the outstanding debt ratings of SunGard Data Systems Inc. (SunGard) as follows:

--IDR to 'B ' from 'B';

--$1 billion senior secured revolving credit facility due 2011 to 'BB /RR1' from 'BB-/RR2';

--$4.3 billion senior secured term loan due 2013 to 'BB /RR1' from 'BB-/RR2';

--$250 million 3.75% senior notes due 2009 to 'B /RR4' from 'B/RR4';

--$250 million 4.875% senior notes due 2014 to 'B /RR4' from 'B/RR4';

--$1.6 billion senior unsecured notes due 2013 to 'B/RR5' from 'B-/RR5';

--$1 billion 10.25% senior subordinated notes due 2015 to 'B-/RR6' from 'CCC /RR6'.

The Rating Outlook is Stable.

Fitch's actions affect approximately $8.4 billion of total debt, including SunGard's $1.0 billion revolving credit facility (RCF).

The rating upgrade reflects:

--Improved credit protection measures, particularly for leverage, driven by solid EBITDA growth. Fitch estimates that total debt/LTM Operating EBITDA and adjusted total debt/LTM EBITDAR (including the fully drawn $450 million A/R Securitization facility) was 5.4 times (x) and 6.0x, respectively at March 30, 2008, compared to 6.1x and 6.6x at Dec. 31, 2006;

--Fitch's expectation that the company will continue to delever, mostly as a result of EBITDA growth via organic growth and acquisitions. The ratings incorporate SunGard maintaining leverage in the 5.0-5.5x range over the intermediate term, with the expectation that acquisition activity could result in leverage above this range on a short-term basis;

--Fitch's belief that the impact of a weaker operating environment for SunGard's financial systems (FS) segment will be mitigated by the company's diverse business lines and recurring revenue base. While organic growth may be negatively affected from a prolonged financial services market downturn, Fitch does not anticipate the downturn to have a material long-term impact on SunGard's credit profile. In addition, Fitch expects SunGard will seek to reduce costs in order to offset any revenue decline during a period of slower growth and challenging markets in the FS segment.

The ratings are supported by SunGard's:

--Strong recurring revenue profile driven by longer-term contracts and significant switching costs;

--Consistent free cash flow;

--Leading positions in each of its businesses with significant scale and product breadth; and

--Well-diversified customer portfolio.

Ratings concerns continue to center on:

--SunGard's significant debt levels and debt service requirements, and Fitch's expectation that meaningful debt reduction is unlikely over the foreseeable future, given limited debt amortization requirements over the next few years;

--Pressured operating EBITDA margins due in part to aggressive pricing related to retaining long-term customer contracts, as well as ongoing acquisitions; and

--Integration risks resulting from SunGard's historical bias toward augmenting mature organic revenue growth rates with acquisitions. Fitch expects that SunGard will continue to enhance more mature market growth rates via acquisitions, particularly in the more fragmented FS, HE and PS segments.

As of March 30, 2008, Fitch believes SunGard's liquidity position was sufficient and supported by approximately $427 million of cash (the majority of which is located outside the U.S.) and $824 million available under its $1 billion senior secured revolving credit facility expiring 2011 (net of $28 million of letters of credit outstanding and, therefore, unavailable for borrowings). SunGard's $450 million accounts receivable (AR) securitization program expiring 2011 was fully drawn. Additionally, for the 12 months ended March 30, 2008, SunGard generated $397 million of free cash flow, excluding cash generated by amounts drawn under the AR facility. Fitch believes SunGard will continue to generate free cash flow in excess of $200 million annually, of which the company is required to use 50%, net of acquisitions, to reduce the term loan balances.

As of March 30, 2008, total on-balance-sheet debt was approximately $7.6 billion and consisted primarily of:

--$4.3 billion of senior secured term loans expiring 2014;

--$250 million of 3.75% senior notes due 2009;

--$250 of 4.875% senior notes due 2014;

--$148 million drawn under the senior secured revolving credit facility expiring 2011;

--$1.6 billion of 9.125% senior unsecured notes due 2013;

--$1 billion of 10.25% senior subordinated notes due 2015.

Debt amortization requirements under the term loans are 1% of the outstanding amount annually.

The Recovery Ratings (RRs) reflect Fitch's belief that SunGard would be reorganized rather than liquidated in a bankruptcy scenario, given Fitch's estimates that the company's ongoing concern value of $6.9 billion is significantly higher than its projected liquidation value, due mostly to the significant value associated with SunGard's intangible assets. In estimating ongoing concern value, Fitch assumes a 7x multiple and discounts SunGard's normalized operating EBITDA by 30%, reflecting some concentration to FS and annual rollover risk of 25% of the company's long-term contract portfolio along with examining the EBITDA levels that would breach financial covenants.