With some recent M&A deals, however, the firms stretched further. Here are examples:

Dell Inc.'s debt relative to earnings after the September purchase of EMC Corp. warranted a rating as low as the Caa band, one of the lowest rungs of speculative grade, from Moody's, the Bloomberg analysis found. Moody's rated the company Ba1, six notches higher.
Charter Communications Inc. received a BB+ grade from S&P after it announced its purchase of Time Warner Cable Inc. Using S&P's estimate of the company's future leverage levels and its view of the company's business risk, and taking into account Charter's $60 billion of debt, the rating should have been BB-, two notches lower, according to Bloomberg's analysis. In 2009, Charter went into bankruptcy under the weight of $21 billion in debt.
Newell Brands Inc., maker of Rubbermaid, deserved a junk grade between B and Ba from Moody's after it agreed to buy Jarden Corp., based on a leverage ratio that was about double its peers with similar ratings, the analysis found. Moody's gave it an investment-grade Baa3.
Kraft Heinz Foods Inc.'s leverage ratio and S&P's assessment of management justified a downgrade to as low as BB-, a junk rating, the analysis found. S&P gave it an investment grade of BBB-, three notches higher.
In June, S&P blessed Microsoft Corp.'s $26 billion purchase of LinkedIn Corp. with its highest rating. It cited Microsoft's "long history of making investment decisions in a fiscally prudent manner" — even though Microsoft had just written down nearly the full $9.5 billion value of its 2014 purchase of Nokia Corp.'s mobile-phone unit.

Ratings officials say that deals that hurt a company's credit health don't always result in downgrades if analysts believe the impact will be temporary.

Instant Insights /

Debt Raters Go Easy on M&A Borrowers

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