Fitch Affirms eBay's IDR at 'A'; Stable Outlook
NEW YORK -- November 20, 2012
Fitch Ratings has affirmed eBay, Inc.'s (eBay) IDR at 'A' with a Stable
The ratings and Outlook reflect the company's leading e-commerce platform; its
strong position in on-line payments as well as the significant potential
growth opportunities for that business both on- and off-line; its significant
and consistent free cash flow generation; and its relatively conservative
balance sheet management.
The ratings incorporate expectations that eBay will limit leverage to 1x or
below. Fitch currently estimates leverage (total debt to EBITDA) at 1.0x. Free
cash flow to total pro forma debt is estimated at 48%. Fitch notes that a
portion of eBay's total debt supports its $1.9 billion in consumer loans at
Bill Me Later.
Fitch's primary credit concern of eBay continues to be the longer-term
potential to separate PayPal from eBay Marketplaces. Fitch believes that as
PayPal outgrows Marketplaces in the long-term, it will represent a stronger
credit profile due to a more stable business, more defensible market position
and the business need for a strong rating to access cost effective capital. In
the near term, Fitch believes there are quantifiable synergies between
Marketplaces, PayPal and GSI. Whether those synergies hold as PayPal grows
into its potential online and offline is unclear.
As of Sept. 30, 2012, eBay's liquidity was strong and supported by
approximately $7.3 billion of cash and equivalents as well as $1.8 billion of
short-term investments. Additionally, the company has $2.5 billion of
long-term investments. Fitch believes a greater share of eBay's cash position
will be located overseas in the future as a higher proportion of the company's
cash flow is generated outside the U.S. due to stronger growth in
Liquidity is further supported by a $3.0 billion revolving line of credit ($0
million outstanding) maturing in November 2016 and free cash flow in excess of
$2.0 billion in the LTM period ended Sept. 30, 2012. In June 2012, the
company's Board of Directors authorized $2.0 billion in incremental share
repurchases. Authorized amount remaining as of Sep 30, 2012 was $2.2 billion.
Total debt as of Sept. 30, 2012 was $4.5 billion and included:
--$400 million 0.875% notes due October 2013;
--$600 million 1.625% notes due October 2015;
--$250 million of 0.7% notes due July 2015;
--$1.0 billion of 1.35% notes due July 2017;
--$500 million 3.25% notes due October 2020;
--$1.0 billion of 2.6% notes due July 2022; and
--$750 million of 4.0% notes due July 2042.
Fitch affirms eBay's ratings as follows:
--Long-term IDR at 'A';
--$400 million 0.875% senior unsecured notes due 2013 at 'A';
--$600 million 1.625% senior unsecured notes due 2015 at 'A';
--$250 million 0.70% senior unsecured notes due 2015 at 'A';
--$1 billion 1.35% senior unsecured notes due 2017 at 'A';
--$500 million 3.25% senior unsecured notes due 2020 at 'A';
--$1 billion 2.6% senior unsecured notes due 2022 at 'A';
--$750 million 4.0% senior unsecured notes due 2042 at 'A';
--Short-term IDR at 'F1';
--$2 billion 4(2) commercial paper program at 'F1'.
The Rating Outlook is Stable.
WHAT COULD TRIGGER A RATING ACTION?
Positive: Future developments that may, individually or collectively, lead to
positive rating action include:
--Further growth and diversification of eBay's business and sources of cash
Negative: Future developments that may, individually or collectively, lead to
negative rating action include:
--The potential to separate the PayPal business from eBay Marketplaces and the
potential to add materially greater leverage to the remaining Marketplaces
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology', dated Aug. 8, 2012;
--'Evaluating Corporate Governance', dated Dec. 13, 2011;
--'Rating Technology Companies', dated Aug. 9, 2012.
Applicable Criteria and Related Research:
Corporate Rating Methodology
Evaluating Corporate Governance
Rating Technology Companies
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Jason Paraschac, CFA, +1-212-908-0746
One State Street Plaza
New York, NY 10004
Brian Taylor, CFA, +1-212-908-0620
Jamie Rizzo, CFA, +1-212-908-0548
Brian Bertsch, New York, +1 212-908-0549
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