S&P lowers Loyalty Ventures

S&P said it lowered its ratings for Loyalty Ventures Inc. to B from B+ and its term loan to B+ from BB-. The loan’s 2 recovery rating is unchanged.

On June 8, LVI reported that Sobeys Inc., decided to leave its Air Miles partnership in August. Sobeys contributed about 10% of LVI’s total EBITDA but higher Air Miles issuance volumes, the agency said.

“We view the loss of this key customer as negative to Loyalty's credit profile and, more important, to the company's business risk profile, and believe that there are significant execution risks associated with Loyalty's ability to sign up new partners amid anticipated macroeconomic weakness. Furthermore, there is a risk that new customers might not offset the EBITDA generated from Sobeys,” S&P said in a press release.

S&P said it forecasts LVI's overall EBITDA, on an S&P Global Ratings' adjusted basis, in the $125 million-$130 million range for 2023 and EBITDA margins of 11%-12%. Previously, the agency estimated EBITDA margins of 16%-16.5%. “We also expect the company's debt to EBITDA ratio will remain elevated in the 5.5x-6x range through 2023.”

The outlook is negative.

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