Moody's cuts Digital Media Solutions

Moody's Investors Service said it downgraded Digital Media Solutions, LLC's corporate family rating to Caa3 from Caa1, its probability of default rating to D-PD from Caa2-PD, and the ratings on the senior secured first-lien bank credit facilities, consisting of a $50 million revolving credit facility and $225 million term loan to Caa3 from Caa1. The SGL-4 speculative grade liquidity rating remains unchanged.

Last month, DMS amended its credit agreement, including giving it the option, starting in the third quarter of 2023, for payment in kind.

Moody's said the D-PD rating reflects the view that the amendment is considered a distressed exchange, which is a default under the agency’s definition. Moody's will upgrade the PDR to Caa3-PD in about three business days.

“The downgrade of the CFR to Caa3 reflects DMS' weak operating performance and uncertainty as to the timing of a business recovery, very high leverage, weak liquidity and the risk that the capital structure remains unsustainable which could result in another amendment, or a debt restructuring in 2024 once the PIK option expires. Governance risks, including an acquisitive growth strategy at a time of uncertain prospects for the business, were material to the rating action and remain a key consideration to the ratings,” Moody’s said in a press release.

The outlook remains negative.

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