OREANDA-NEWS. S&P Global Ratings today placed its 'B' corporate credit rating and issue-level ratings on, Daly City, Calif.-based Greeneden U. S. Holdings II LLC (Genesys) on CreditWatch with negative implications.

Following the close of the acquisition of Interactive Intelligence Group Inc. (unrated), we will likely withdraw the ratings on Genesys' existing facilities because we expect that it will refinance them as part of this transaction.

"The CreditWatch placement follows Genesys' announcement that it has entered into an agreement to acquire Interactive Intelligence Group Inc. for a total consideration of $1.4 billion," said S&P Global Ratings credit analyst Kenneth Fleming. "Genesys is planning to fund this transaction through a combination of cash and debt," he added.

While the business combination improves Genesys' position in the rapidly growing cloud software market for contact centers, we believe this transaction could result in Genesys' leverage increasing from current levels given Interactive's relatively low EBITDA margin.

Our corporate credit rating on Genesys reflects our assessment of the company's leverage in the low-5x area, its financial sponsor ownership, and participation in the fragmented contact center market. Partly offsetting these factors are Genesys' leading market position in the high end call center market, diversified customer base with high renewal rates, and stable free cash flow generation.

The final outcome will largely depend on details of the financing, the expected cost synergies from the merger and cross-selling opportunities, and how quickly they can be realized. We will also need to assess the potential impact of the acquisition on the combined group's business risk profile.

We aim to resolve the CreditWatch within the next 90 days. The resolution will include our review of the company's business plan for the combined group, including the expected cost synergies and how quickly they can materialize, a review of the company's new capital structure, and the company's long-term financial policy.

On completion of the transaction, we could lower the ratings to 'B-' if we think leverage or cash flow adequacy prospects will remain weaker than 'B' rated issues.

We could also affirm the ratings if we see sustainable rapid deleveraging thanks to meaningful merger-related synergies, limited execution risks, and solid free cash flow generation.