April 10 (Bloomberg) -- Automatic Data Processing Inc., the payroll-and-benefits provider that said it’s spinning off its auto-dealer services unit, was stripped of its top AAA credit ratings by Standard & Poor’s and Moody’s Investors Service.
S&P cut its grade two levels to AA, citing ADP’s plan to use at least $700 million of proceeds from the tax-free spinoff to repurchase shares. Moody’s lowered its ranking one step to Aa1, saying the diminished scale and variety of ADP’s products increases the company’s credit risk.
“The rating downgrade reflects ADP’s more narrowly focused business profile, with the company’s operations now entirely devoted” to employee services, S&P analyst Jacob Schlanger said in a statement today.
The credit cuts remove ADP from the thinned-out ranks of AAA rated companies. Only three -- Johnson & Johnson, Exxon Mobil Corp. and Microsoft Corp. -- still retain the top grade from Moody’s.
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