S&P slices Digital Media Solutions

S&P said it downgraded its ratings from Digital Media Solutions Inc. to SD, selective default, from CCC+ and its senior secured revolver and term loan to D from CCC+.

“The downgrade reflects S&P's expectation that Digital Media Solutions Inc. is highly likely to exercise its option to convert its next four quarterly interest payments to payment-in-kind from cash. DMS entered into a credit amendment on Aug. 16, 2023, which among other things modified the company's credit facility to allow the payment-in-kind of its interest for its next four quarterly payments; eliminated its total net leverage covenant for the remainder of 2023, with a resetting of the covenant to 15.6x beginning the first quarter of 2024; and established a minimum liquidity covenant,” the agency said in a statement.

S&P said it would consider exercising the PIK option as equivalent to default because investors would get less value than originally promised.

Digital Media Solutions’ debt is trading at a discount to par of about 25%.

“We will update our issuer credit rating on the company and our issue-level ratings on the affected debt to an appropriate level after we have further reviewed the capital structure and cash flow prospects for the company following its recent credit amendment. We expect to raise the rating back into the CCC category,” S&P said.

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