Banff Parent Inc.

The stable outlook reflects our view that BMC's high proportion of recurring revenue and strong customer retention provide it with a solid revenue base, which--combined with the synergies from its merger with Compuware and the paring of one-time costs--will improve its credit metrics. Specifically, we expect the company's leverage to fall to 8.1x and its FOCF to debt to increase to 4.7% in fiscal year 2022. We could raise our rating if BMC delivers stable operating results through a renewal cycle while maintaining leverage of less than 8x and FOCF to debt in the mid-single digit percent area. We would also need to believe that the company's financial-sponsor owners could achieve their financial return and inorganic growth objectives while maintaining

...BMC Software Inc.'s performance exceeded our expectations in fiscal year 2021 (ended March 2021). The company increased its pro forma revenue by 6% in 2021, which compares with our forecast for a mid-single digit percent decline in May 2020, because the COVID-19-related recession had a much less severe effect on the software industry at large, and BMC in particular, than we had expected. The company was also rebounding from a trough year when many of its multi-year contracts came up for renewal. BMC outperformed our EBITDA forecast by more than 25% due to operating leverage on a better-than-expected increase in its revenue. Although still highly leveraged, the company has improved its credit metrics and we expect they will improve further in fiscal year 2022. Pro forma for a full year of EBITDA from Compuware but excluding pro forma adjustments for cost savings, BMC ended fiscal year 2021 with leverage of 8.9x. This is an improvement from its leverage in the high-10x area as of the start...

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