Standard & Poor's Assigns Single-'B' Rating to Systems & Computer Technology Corp.'s Convertible Subordinated Notes

Strategic Insights -

Standard & Poor's has assigned its single-'B' rating to Systems & Computer Technology Corp.'s (SCT) $65 million 5% convertible subordinated notes due 2004, in addition to its double-'B'-minus corporate credit rating and bank loan rating. SCT's ratings reflect its strong niche market position, good cash flows, and enhanced financial flexibility, tempered by its narrow business base and competitive challenges.

Key Takeaways:

  • SCT has a strong niche market position in the government, utility, enterprise resource planning, and U.S. higher education markets, with sales approaching $300 million in fiscal 1997.
  • The company's ratings reflect its good cash flows, enhanced financial flexibility, and positive free cash flow, with funds from operations to total debt currently strong in the 50% range.
  • SCT has a leading position in the higher education market, but growth opportunities in other niche segments are subject to competition from larger and more diversified companies.
  • The company has $102 million in cash and availability under its $30 million unsecured revolving credit facility, providing near-term financial flexibility.
  • Management is expected to maintain a relatively conservative financial policy, with continued moderate-sized outsourcing investments or acquisitions expected.
  • SCT's ratings anticipate continued profitability improvement, with longer-term prospects dependent on the company's ability to successfully expand its current business base.

Statistics:

  • SCT's sales approached $300 million in fiscal 1997.
  • The company has $102 million in cash (as of Dec. 31, 1997).
  • SCT has availability under its $30 million unsecured revolving credit facility.
  • The company's funds from operations to total debt is currently strong in the 50% range.
  • SCT's free cash flow is positive.

Sources:

  • Standard & Poor's CreditWire, 2/11/98