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Moody’s lowers Global Eagle, facility to B2
Moody's Investors Service said it downgraded Global Eagle Entertainment, Inc.'s corporate family rating to B2 from B1, probability of default rating to B2-PD from B1-PD and speculative grade liquidity rating to SGL-3 from SGL-2.
The agency also downgraded the company's senior secured first-lien credit facility, consisting of an $85 million senior secured revolver and $500 million term loan, to B2 (LGD3) from B1 (LGD3).
The outlook was changed to negative from stable.
On April 21, Global Eagle began seeking waivers from lenders under its senior secured credit facility regarding reporting requirements due to the company's failure to file its fiscal year-end 2016 Form 10-K by March 31. The company's inability to file within the one month cure period ending April 30 necessitates the waiver, which seeks to extend the filing date to June 30 with investor responses due by April 28.
“This covenant breach follows significant management changes at the company since it entered into the new credit facility on January 6, 2017, which included the negotiated exit of the prior CEO on February 17, 2017 and the prior CFO on February 20, 2017; both have since been replaced,” Moody’s said in a news release.
“In addition, the company's chief accounting officer resigned on April 14, 2017. Global Eagle’s auditors have identified material weaknesses in the internal controls of the company's financial reporting.
“On April 18, 2017, the company disclosed that it had drawn $50 million under its $85 million revolver,” the agency added in the release.
Moody’s said the downgrades reflect the disclosure of these internal reporting weaknesses, as well as the reduction in liquidity since its Dec. 21, 2016 initial rating assignment. The negative outlook will remain until potential greater clarity is provided with financial filings of both fiscal year-end 2016 and first quarter 2017 reporting periods.
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