Balboa Intermediate Holdings LLC

The stable outlook reflects S&P Global Ratings' belief that Balboa Intermediate Holdings LLC's operating performance will benefit from a higher proportion of recurring revenues, that profitability and margins will remain stable at around 35%, and that the company can generate at least $125 million in free cash flow over the next 12 months. We project these trends, alongside modestly conservative financial policies, should allow the company to reduce leverage to around 8x over the next 12 months. We could raise our rating on Balboa if stronger-than-expected operating performance improves leverage below 8x, and we believe that management intends to sustain leverage below this level through acquisitions and shareholder returns. We could lower our rating on Balboa if operating difficulties significantly

...TIBCO is shifting smoothly to subscription and cloud offerings. As of third quarter of fiscal 2019, Balboa Intermediate Holdings LLC (doing business as TIBCO Software Inc.) has recurring and subscription revenue of 66% and 42%, respectively, compared to 63% and 38% a year ago. Lower-margin legacy service contracts constitute 11% compared to 13% a year ago. These changes bring stability and better visibility to the company's performance. Leverage should continue to decline gradually. TIBCO's leverage has declined modestly to 8.1x in the third quarter of fiscal 2019 compared to 8.3x a year ago. We expect a similar gradual decline in leverage over the coming year primarily from EBITDA growth and regular debt amortization. Rating upside over the next 12 months will likely hinge on the sponsor's financial policy. While leverage has approached our upgrade trigger of 8x as expected, we are unsure if will be sustained over the longer term. We believe the company will likely need to address its...

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