OREANDA-NEWS. Fitch Ratings has affirmed the Issuer Default Rating (IDR) and senior unsecured debt ratings of Broadridge Financial Solutions, Inc. (Broadridge) at 'BBB+'. The Rating Outlook is Stable. See the full list of ratings at the end of the release.

KEY RATING DRIVERS

The ratings and Outlook are supported by the following considerations:

--Broadridge has a leading share in the proxy distribution market, which Fitch views as facing minimal competitive threats and pricing that is largely insulated by SEC regulations;
--The company's core Investor Communications and Global Technology and Operations business segments produce steady free cash flow (FCF) with minimal exposure to economic volatility;
--Long-term customer contracts and customer relationships in both core businesses;
--Broadridge has a moderately diverse customer base with no customer representing greater than 5% of total revenue. The largest 15 clients represent 60% of revenue. The company has expectations of achieving greater geographic diversification by capitalizing on growth opportunities in international markets going forward;
--The low capital intensity of Broadridge's business model has produced high historical returns on invested capital.

Ratings concerns include the following:

--Changing regulations could negatively impact Broadridge's business, particularly related to the proxy distribution business;
--Broadridge's acquisition growth strategy carries integration and execution risks;
--Execution risk related to the company's processing of confidential client information and the risk of security breaches as well as operating risks stemming from the mission-critical nature of the company's securities processing business.

Leverage: Broadridge's total adjusted debt leverage for the LTM ending Dec. 31, 2014, was 1.41x. Fitch expects this metric to trend upward over the next couple of years toward the company's 2x longer-term target as it executes on its acquisition and share repurchase capital allocation strategies. The 2x leverage target is within Fitch's expectations for the 'BBB+' rating.

FCF: Over the LTM ended Dec. 31, 2014, FCF was \$229 million, slightly less than the \$250 million recorded in FY2014. Funds from operations were higher in the LTM period, but were offset by lower funds provided by working capital and an increase in the dividend. For FY2015, Fitch estimates FCF (cash flow from operating activities less capital spending and dividends) will be in a range of \$200 million to \$250 million.

Liquidity: As of Dec. 31, 2014, liquidity was solid at \$1.064 million, which included \$314 million in cash and a fully available \$750 million senior unsecured revolving credit facility which matures in August 2019. The credit agreement was amended and extended in August 2014. Principal financial covenants in Broadridge's credit facilities require a minimum interest coverage ratio of 3x and a maximum leverage ratio of 3.5x. The company currently targets a dividend of 45% of net earnings.

No Material Near-Term Maturities: Total debt as of Dec. 31, 2014 was \$524 million which includes \$400 million outstanding senior unsecured notes due September 2020 and \$125 million in senior unsecured notes due June 2017.

KEY ASSUMPTIONS

--Broadridge can organically grow revenue in the low- to mid-single digits with periods of higher growth driven by acquisitions;

--EBITDA margins going forward are expected to be in the low 20% range and improve over the near term;

--FCF to adjusted debt, longer term, is expected to be in the 10% to 15% range, with adjusted debt to EBITDAR of approximately 2x or less.

--Broadridge is expected to utilize excess FCF for share repurchases and acquisitions;

--Quarterly results will remain volatile depending on the level of event-driven revenues but as Broadridge continues to diversify its business beyond proxy services, year-to-year volatility in results will be reduced.

RATING SENSITIVITIES

Positive Action: A positive rating action could occur if:

--Broadridge's acquisition and growth strategy eventually results in enough diversification to consider a higher rating, but that is unlikely to occur in the near-term;
--Total adjusted debt/EBITDAR is maintained at or below 2x.

Negative Action: A negative rating action could occur if:

--A more aggressive acquisition strategy or poorly executed acquisitions negatively affects the rating;
--Total adjusted debt/EBITDAR of 2.25x or higher on a sustained basis leads the agency to a downgrade in the absence of a credible delevering plan.

Fitch has affirmed the following ratings. The Rating Outlook for all ratings is Stable.

Broadridge Financial Solutions, Inc.
--Long-term Issuer Default Rating (IDR) at 'BBB+';
--\$750 million senior unsecured revolving credit facility due 2019 at 'BBB+';
--\$125 million senior unsecured notes due 2017 at 'BBB+';
--\$400 million senior unsecured notes due 2020 at 'BBB+'.