Moody’s Not Thrilled About eBay’s $7.5B PayPal Debt Inheritance

Not everyone thinks the eBay-PayPal no-fault divorce is the greatest thing to happen to the exchange of goods and services since the replacement of the barter system.

Moody’s Investors Service is reviewing eBay’s downgrade following the company’s announcement of its plan to divide into two companies.  At issue is the $7.5 billion in debt that eBay will inherit from PayPal and questions about how the giant pile of cash the PayPal IPO is almost certain to generate will be divided going forward.

Moody’s is also curious as to what the allocation of the estimated $15 billion in cash and liquid investments would be between the two companies.

The A2 senior unsecured ratings and the Prime-1 short-term rating are specifically what is under review, a downgrade could make it more expensive for eBay to raise future debt.

“The rating review reflects Moody’s view that eBay’s planned spin-off will result in a smaller company, with a weaker credit profile than the current combined business,” Moody’s wrote in its note.

eBay may be positioning the marketplaces business for an acquisition, according to some analysts, reports eCommerceBytes, possibly to Alibaba.

“The review could lead to a multi-notch downgrade, but it will likely result in eBay retaining investment grade status,” Moody conclude in its note.


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