OREANDA-NEWS. June 05, 2015. Pitney Bowes Inc.'s (PBI) 'BBB-' Issuer Default Rating (IDR) and its subsidiary, Pitney Bowes International Holdings, Inc. (PBIH), are not affected by the recent announcements of the purchase and sale of certain separate assets. The Rating Outlook remains Stable.

On May 29, 2015, PBI closed on the sale of its marketing services organization, Imagitas, for \\$310 million in cash to Red Ventures. Imagitas has a strategic partnership with the United States Postal Service to facilitate official changes of address and generated \\$128 million in revenue in 2014. Red Ventures offers advanced internet analytics across a variety of high-growth industries, including consumer home services, insurance, energy, financial services and software.

Proceeds are expected to be used to partially fund PBI's recently announced acquisition of Borderfree for \\$395 million in cash. Borderfree provides cross-border ecommerce solutions through a proprietary technology and services platform that enables retailers in the United States and United Kingdom to transact with consumers around the world. Its customers include retailers, department stores, apparel brands, and lifestyle brands that sell a range of physical goods online. The company manages all aspects of the international shopping experience, including site localization, multi-currency pricing, payment processing, fraud management, landed cost calculation, customs clearance and brokerage and global logistics services while maintaining company branding and customer service. Borderfree generated \\$125 million in revenue in 2014 and has 253 employees in New York, NY, its headquarters, with offices in Tel Aviv, Israel, Dublin, Ireland, and Brighton, England.

Fitch views both transactions positively as they are representative of management's efforts to transform PBI by expanding into high growth markets. Imagitas was a good, steady business that did not offer sufficient growth prospects. Borderfree offers excellent growth potential in the ecommerce segment, an area specifically mentioned as a focus for PBI. It also has significant overlap with PBI's existing global cross-border ecommerce business, which has been providing these services for more than 15 years. PBI currently services more than 100 merchants including 45 of the top 100 Internet retailers.

PBI has stated its commitment to investment grade metrics, although these metrics and their levels have not been defined. Fitch believes that various actions taken since 2011 demonstrate PBI's commitment. PBI has reduced its total debt, including PBIH's preferred securities, from \\$4.5 billion in 2011 to \\$3.4 billion at March 31, 2015. Unadjusted gross total leverage has declined from 4.7x in 2011 to 3.8x at March 31, 2015 and core leverage has gone from 4.3x in 2011 to 3.1x. Fitch expects 2015 year-end (YE) unadjusted gross total leverage to be in the range of 3.6x.

Fitch is not expecting any material acquisition or share buyback activity, and there is limited room within the ratings for any substantive share buyback activity. Any debt-funded share buyback activity or a material debt-funded acquisition would be outside of current ratings.

KEY ASSUMPTIONS

Fitch's key assumptions within the issuer's rating case include:
--De-levering to 3.5x within 12 to 18 months;
--Minimal margin improvement as a majority of the company's expected cost savings have been realized;
--No material change to stated dividend and share buyback policy;
--Majority of maturities are refinanced.

RATING SENSITIVITIES

Positive: Given the secular challenges facing the company, Fitch does not expect positive rating momentum in the near term. Sustainable revenue growth driven by the company's various product initiatives coupled with a commitment to continue reducing absolute levels of debt may drive positive rating momentum.

Negative: Future developments that may, individually or collectively, lead to a negative rating action include:
--Lack of traction in the company's digital initiatives and other growth businesses amid ongoing declines in the traditional physical business. Also, sustained revenue declines in the mid- to high-single-digits would pressure the ratings;
--A sustained increase in total leverage from current levels, whether the result of incremental debt or lower EBITDA;
--Indications of a more aggressive financial policy.