S&P lowers Lereta outlook to negative

S&P said it changed its outlook for Lereta LLC to negative from stable and affirmed all its ratings, including the B- ratings on its term loan and revolver.

“Lereta's small EBITDA base and modest free cash flow leave little cushion for further mortgage industry stress. Residential mortgage origination volumes declined more than 40% in the first quarter of 2022, primarily due to lower refinancing transactions caused by rapidly increasing mortgage rates. The Mortgage Bankers Association (MBA) forecasts these declines to persist throughout the year, followed by a more modest 9% decline in 2023,” the agency said in a press release.

However, the agency said it still sees Lereta will deliver positive free cash flow in 2022, though in the single-digit millions.

“The negative outlook reflects the stress in the mortgage market, and the risk that we could lower our rating on Lereta if industry conditions deteriorate such that the company will not generate positive free cash flow, liquidity becomes pressured, or the company is in danger of breaching covenants,” S&P said.

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