Fitch Ratings has issued a statement affirming the Long-Term Issuer Default Rating (IDR) of Block, Inc., formerly Square (NYSE:SQ), at ‘BB’.
Fitch said its outlook of Block remains “Positive” adding that its debt could decline in the coming years as EBITDA scales.
Fitch affirmed the company’s $600 million senior unsecured revolver, senior unsecured notes, and convertible notes at ‘BB’/’RR4’. The ratings impact approximately $4.8 billion of debt outstanding at June 2022.
Fitch said that founder and Chairman/CEO Jack Dorsey’s ownership and control position, with 43% of voting power as of March 2022, was meaningful to the rating.
Fitch said that Block is well positioned to capitalize on secular growth areas in payments and consumer financial services adding that the “company witnessed tremendous growth over the past decade, with TTM gross profit as of June 2022 of $5.1 billion versus $65 million in 2012.”
Fitch commented on the Afterpay Acquisition, which Block purchased for $15 billion including assumed debt, as credit neutral but said there is integration risk and incremental consumer financing risk. Fitch sees the acquisition as fitting within Block’s overall strategy and adds value to Block’s customers.
Fitch said the Fintech is well positioned to capitalize on payments growth but it faces stiff competition.