Investing.com -- S&P Global Ratings has upgraded the issuer credit rating of U.S.-based IAC Inc. to ’BB’ from ’BB-’ following the completion of its spin-off of Angi Inc. The ratings were removed from CreditWatch, where they were placed with positive implications on Nov. 15, 2024.
The spin-off, completed in March 2025, has led to a favorable view of IAC’s business, now primarily driven by its subsidiary, Dotdash Meredith (NYSE: MDP ) Inc. Dotdash, a stronger entity than Angi, contributes the majority of IAC’s EBITDA. The subsidiary boasts a diverse portfolio of well-known brands, larger scale, and a higher percentage of organic user traffic, with S&P Global Ratings-adjusted EBITDA margins of 20%.
However, IAC’s other businesses, including Care.com, Ask Media Group, Vivian Health, The Daily Beast, and IAC Films, slightly lessen the overall assessment of the company due to lower margins and scale, along with declining EBITDA in some sectors. Consequently, IAC’s consolidated S&P Global Ratings-adjusted EBITDA margins currently stand at 10%-12%.
S&P Global Ratings expects IAC to end 2025 with approximately $1.2 billion in cash and generate about $35 million of free operating cash flow (FOCF) in the same year. The muted cash flow in 2025 is due to costs associated with the Angi spin-off, $43.1 million in expenses related to its lease termination at Dotdash Meredith, and potential earnings pressure due to macroeconomic uncertainty. FOCF is projected to improve to around $111 million in 2026.
The company’s substantial cash balance and expected cash flow generation are anticipated to provide it with ample liquidity to meet its upcoming operating and fixed-charge obligations. This liquidity, along with the company’s 23.1% stake in MGM Resorts (NYSE: MGM ) International valued at $1.9 billion as of March 31, 2025, supports the current rating.
IAC’s significant cash and monetizable investments, despite an expected elevated leverage of about 6x in 2025 and FOCF to debt of about 3.4%, contribute to a stable outlook. The company has completed approximately $200 million in share repurchases year to date and is expected to continue using its liquidity position for similar purposes.
The rating could be lowered over the next 12 months if IAC’s cash or investment balances deplete significantly, its operating performance deteriorates due to increased competition or a prolonged economic downturn, or if the company pursues acquisitions or spin-offs leading to a less favorable view of the business or a significant deterioration in credit metrics.
While considered unlikely in the near term, S&P Global Ratings could raise IAC’s rating if the business improves, which would likely be achieved through accretive acquisitions, leading to increased scale and business diversification.
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