Dell Technologies was upgraded to BBB from BBB- by Fitch. The upgrade comes on the back of Dell’s stronger credit profile thanks to the use of cash flow/net proceeds from the tax-free spin-off of VMware and reducing debt by $6.5bn in the fiscal YTD alongside stronger results. Fitch said that Dell will use around its $9.3-9.7bn pro rata share of VMware’s $11.5bn dividend paid in connection with the spin-off for debt reduction. This would help Dell’s credit metrics to be consistent with a BBB profile. Dell’s expected ability to continue outperforming the PC market adds to its positives. Fitch expects Dell’s core debt-to- EBITDA (excluding the impact of Dell’s captive financing unit) at less than 2.5x following the spin-off and to approach 2.0x in the near term. Dell had $5.8bn of cash and cash equivalents end-July 2021 and Fitch sees $3.5-4.5bn of adjusted free cash flows that support liquidity.

Dell’s bonds were flat with its 6.2% 2030s at 127.39, yielding 2.57%.

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