TEX-S&P puts NASDAQ OMX ratings on watch negative

  (The following statement was released by the rating agency)
  -- The NASDAQ OMX Group Inc. is teaming up with Intercontinental-Exchange
(ICE) to acquire, on an unsolicited basis, NYSE Euronext, which has already
signed an agreement to merge with Deutsche Boerse.
  -- We are placing the NASDAQ OMX on CreditWatch Negative.
  -- We expect to update the CreditWatch after we determine if NASDAQ OMX
is the winning bidder for NYSE Euronext.
  April 1 - Standard & Poor's Ratings Services said today that it placed its
ratings on The NASDAQ OMX Group and its affiliates, OMX AB and NASDAQ OMX
Stockholm AB, on CreditWatch Negative.
  "The CreditWatch action follows NASDAQ OMX's announcement that it and ICE
plan to acquire NYSE Euronext and split it up between themselves. Although
there are many compelling strategic advantages and cost-saving opportunities
for a NASDAQ OMX-NYSE Euronext combination, the use of debt to fund a portion
of the acquisition price greatly increases the combined organization's
financial risk profile," said Standard & Poor's credit analyst Charles D.
Rauch.
  Under the proposed transaction, NASDAQ OMX and ICE would jointly acquire
NYSE Euronext for about $13.3 billion. NASDAQ OMX's share would be about 52%;
ICE's share 48%. NASDAQ OMX would finance its $7.0 billion portion of the
purchase price with $2.8 billion of common stock, $2.1 billion of cash, and
the assumption of $2.1 billion of NYSE Euronext debt.
  Total debt, including $2.1 billion of acquisition financing, at the
combined company would approximate $6.5 billion. We estimate key credit
metrics, at least initially, would not be those of an investment-grade
company. This leads us to an additional concern. NYSE Euronext bonds contain a
"change of control triggering event". If NASDAQ OMX succeeds in acquiring NYSE
Euronext and the company is downgraded below investment grade by two
nationally recognized statistical rating organizations, the bondholders can
put the NYSE Euronext bonds to NASDAQ OMX, leading to a potential credit cliff.
  On the positive side, if NASDAQ OMX's bid is successful, it would acquire
the world's premier stock exchange--the New York Stock Exchange--plus four
exchanges in Europe. With the addition of NYSE Euronext, NASDAQ OMX would also
have a near 50% market share in U.S. stock option trading.
  NASDAQ OMX is initially projecting about $450 million of run-rate cash
synergies. We believe this target is reasonable given the overlapping
businesses in the U.S. and Europe and NYSE Euronext's high expense base
relative to other rated exchanges. In addition, NASDAQ OMX has demonstrated
its ability to wring out excess costs from previous acquisitions, such as the
Philadelphia Stock Exchange and OMX AB.
  During the CreditWatch period, we will gather additional information
about the details and timing of the expected cost synergies. This is important
in estimating free operating cash flows and assessing the speed by which
NASDAQ OMX can deleverage the balance sheet. A critical challenge will be to
accumulate sufficient cash in the first two years after the acquisition to
service the $1.4 billion of debt that matures in 2013.
  If we believe NASDAQ OMX will quickly deleverage the balance sheet (and
refrain from share repurchases) during the next two years (2012-2013), we
would likely keep the company investment grade. Otherwise, the ratings would
fall into the non-investment-grade category. If NASDAQ OMX is unsuccessful in
its attempt to acquire NYSE Euronext, we would most likely affirm the ratings
with a negative outlook.
RELATED CRITERIA AND RESEARCH
  -- Credit FAQ: What's Behind the Global Exchange Industry's Urge to
Merge?, Feb. 24, 2011
  -- 2011 Outlook: Serious Reforms Make Future Unclear For Global Exchanges
And Clearinghouses, Jan. 10, 2011
  -- The NASDAQ OMX Group Inc., Dec. 17, 2010
  -- Research Update: The NASDAQ OMX Group Inc. Outlook Revised to Negative
from Stable; Ratings Affirmed, Dec. 16, 2010
  -- Credit FAQ: Are Exchanges and Clearinghouses 'Too Big To Fail'?, Nov.
11, 2010
  -- Credit FAQ: Creditworthiness At Exchanges And Clearinghouses Set To Be
Tested Further By Changing Market And Sustained Pressure On Tariffs, Oct. 19,
2010
  -- Standard & Poor's Updated Methodology for Rating Exchanges and
Clearinghouses, July 10, 2006
Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at www.globalcreditportal.com. All ratings affected
by this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left
column.
Primary Credit Analyst: Charles D Rauch, New York (1) 212-438-7401;
                     [email protected]
Secondary Contacts: Nik Khakee, New York (1) 212-438-2473;
                 [email protected]
                 Thierry Grunspan, Paris (33) 1-4420-6739;
                 [email protected]
 (New York Ratings Team)


TEX-S&P puts NASDAQ OMX ratings on watch negative