Moody’s cuts Pinnacle Holdco, debt

Moody's Investors Service said it downgraded Pinnacle Holdco Sarl’s (Paradigm) corporate family rating to Caa1 from B2, probability of default rating to Caa1-PD and the facility ratings on its first- and second-lien debt to B3 (LGD3) and Caa3 (LGD6), respectively.

The outlook remains negative.

The two-notch downgrade of the corporate family rating reflects the impact the energy industry's prolonged depressed operating environment has had on Paradigm, whose revenues Moody's expects could fall again in 2016, by as much as 15%, with negative implications for leverage and liquidity.

Paradigm's narrow focus on geophysical oil and gas software is problematic in a weak pricing environment like the current one, as energy prices are critical for Paradigm's customers' cash flow and, in turn, their ability to fund exploration and development.

While ongoing cost reductions implemented by the company in response to market conditions may keep profit margins stable, the agency said it believes that pronounced softness in demand will markedly reduce absolute EBITDA results, pushing leverage to well above 8 times by late this year.

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