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Fitch Affirms Thomson Reuters' IDR at 'A-'; Outlook Stable.

NEW YORK -- Fitch Ratings has affirmed Thomson Reuters Corp.'s (TRI) long-term IDR at 'A-'. The Rating Outlook is Stable.

Rating Rationale:

--Fitch's ratings for TRI reflect the company's cash flow generating ability, its sound balance sheet and its consistent and conservative financial policies. Fitch expects that TRI will continue to target 2.0 times (x) net unadjusted leverage.

--Fitch recognizes that there are meaningful barriers to entry in TRI's core businesses. There are also a limited number of well-capitalized competitors that compete predominantly on product differentiation, quality and delivery.

--The ratings reflect the planned divesture of the healthcare business. Fitch believes management will continue to be disciplined in its approach to divestures and acquisitions. Fitch expects proceeds from divestures and cash generated by operations to be used for investments into its core businesses, acquisitions and for return of capital to shareholders (dividends and/or share buybacks).

--Rating concerns include cyclicality of the Financial and Risk (F&R) segment. However, TRI's overall revenue/product diversification creates a cushion to absorb some pressures within a particular segment.

--TRI has guided to low single digit growth in total ongoing revenues and adjusted EBITDA margins expanding 60 to 160 basis points. Fitch believes this is attainable. That said, the ratings have tolerance for revenue and EBITDA margin expansion to be less than TRI's expectations.

--Also, as with other highly rated media companies, the potential threat of financial policy revisions is an inherent concern.

Key Rating Drivers:

--Rating upside is limited. However, an explicit commitment to and sustained track record of more conservative balance sheet metrics could merit upgrade consideration.

--Fitch believes that TRI is committed to its balance sheet parameters. However, a significant acquisition or heavy repurchases that left TRI operating materially outside its targeted leverage comfort range for several sequential periods, without a publicly stated plan to de-lever, could result in a negative rating action.

During the recent downturn, the Markets business generally exhibited less operating leverage (on an EBITDA basis) than Fitch would have anticipated for a predominantly fixed-cost business. Cost reductions in connection with the integration of Reuters provided a significant offset to decline in revenues. This in turn provided support to EBITDA margins. The ratings reflect Fitch's expectations that EBITDA margins will be more susceptible in future downturns. Fitch notes that the subscription nature of the business provides a lag. This gives management visibility on the need for fixed-cost actions to preserve margins.

Free Cash Flow (FCF)

Based on Fitch's calculations, last twelve months (LTM) FCF (after dividends) as of March 31, 2012, was approximately $638 million. TRI's overall pension position was 88% funded. Fitch does not expect any significant cash drains related to pension plan funding.

Liquidity

Cash and cash equivalents totaled $467 million as of March 31, 2012. Liquidity is also supported by TRI's $2 billion commercial paper program, with $285 million in CP issued as of March 31, 2012. The commercial paper program is supported by its undrawn $2 billion revolving credit facility that expires August 2016. TRI has ample cushion inside of the facility's 4.5x net debt to rolling last 12 months (LTM) adjusted EBITDA leverage covenant.

TRI has the following near-term maturity schedule:

--$1 billion in notes maturing in 2013;

--$1.4 billion in notes maturing in 2014; and

--Approximately $600 million coming due in 2015 and 2016.

Given its liquidity position, access to capital market and FCF generation, Fitch believes TRI has the flexibility to address upcoming maturities, make acquisitions and/or share repurchase activity.

Leverage

As of March 31, 2011, debt totaled $7.5 billion, Fitch calculated unadjusted gross leverage was approximately 1.9 times (x). Unadjusted net leverage was 1.8x. Pro forma for expected divestures, Fitch expects unadjusted gross leverage of approximately 2.25x at the end of 2012, and net leverage under TRI's targets.

Fitch has affirmed the following ratings:

TRI

--IDR at 'A-';

--Bank credit facility at 'A-';

--Senior unsecured notes at 'A-';

--Short-term IDR at 'F2';

--Commercial paper at 'F2'.

The Rating Outlook is Stable.

Additional information is available at www.fitchratings.com. The ratings above were unsolicited and have been provided by Fitch as a service to investors.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 12, 2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
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Geographic Code:1U2NY
Date:Jun 20, 2012
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