Mastercard Inc.'s Proposed Senior Unsecured Debt Rated 'A+'

NEW YORK (S&P Global Ratings) March 24, 2020--S&P Global Ratings today said it assigned its 'A+' debt rating to Mastercard Inc.'s (A+/Stable/A-1) proposed offering of three issues of senior unsecured debt. We expect the company to use the proceeds for general corporate purposes and to bolster its liquidity during a time of significant economic stress and market volatility caused by the coronavirus pandemic.
The company announced the issuances shortly after lowering its expectations for first-quarter revenue and expenses to the low single digits and low-to-mid single digits, respectively, and suspending its full-year outlook. If S&P Global economists' current forecast for a first-half U.S. and global recession and a second-half recovery proves correct, we would expect Mastercard's performance to suffer in the second quarter meaningfully before regaining at least some of its momentum in the remainder of the year.
The combination of the debt issuances and a slowdown or contraction in EBITDA should push Mastercard's weighted debt-to-EBITDA leverage, as we calculate it, to approximately 0.6x-0.8x, far below the 1.5x level we have said could trigger a downgrade if approached or exceeded. Furthermore, EBITDA growth after 2020 could cause leverage to fall again, assuming the economy is growing. We believe it would likely take further debt issuances, a recession extending well into 2020 or 2021, or a combination of the two to cause Mastercard's leverage to exceed 1x.
We also view the improvement in Mastercard's liquidity, resulting from the issuances of long-term debt, as prudent. For instance, the added liquidity improves Mastercard's ability to handle the settlement risk related to its guarantee of settlement among its clients for Mastercard- and Maestro-branded volume that it switches through its network. While historically the company has consistently had low losses related to settlement risk, such losses are more probable during periods of general financial stress.
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