Research Update: TriNet Group Inc. Outlook Revised To Negative On Economic Impact Of COVID-19; Ratings Affirmed

We expect U.S. real GDP to contract significantly in 2020, driven by effects related to COVID-19 and higher unemployment rates, which we expect will spike in the mid-to high-teens in second-quarter 2020. Absent a sharp rebound in U.S. employment levels, we believe the professional employer organization industry could face spending declines as the weaker macroeconomic environment leads to business failures or lower employment within the key small and midsize businesses end market. While the extent and duration of the recession and its impact on TriNet Group Inc.'s creditworthiness is uncertain, we believe the company's leverage could temporarily rise and exceed our 2.5x downgrade threshold for the 'BB' rating. We are revising our outlook on TriNet to negative from stable. The

...- We expect U.S. real GDP to contract significantly in 2020, driven by effects related to COVID-19 and higher unemployment rates, which we expect will spike in the mid-to high-teens in second-quarter 2020. - Absent a sharp rebound in U.S. employment levels, we believe the professional employer organization industry could face spending declines as the weaker macroeconomic environment leads to business failures or lower employment within the key small and midsize businesses end market. - While the extent and duration of the recession and its impact on TriNet Group Inc.'s creditworthiness is uncertain, we believe the company's leverage could temporarily rise and exceed our 2.5x downgrade threshold for the '##' rating. - We are revising our outlook on TriNet to negative from stable. - The negative outlook reflects the risk of a prolonged period of business disruption resulting from the COVID-19 pandemic and a global recession that results in sustained credit measure weakness....

Research Update