Moody’s downgrades Progrexion

Moody's Investors Service said it downgraded PGX Holdings, Inc.'s (Progrexion) corporate family rating to B3 from B2 and probability of default rating to B3-PD from B2-PD.

The agency affirmed Progrexion's first-lien senior secured term loan at B1 and downgraded its second-lien senior secured term loan to Caa2 from Caa1.

The outlook is negative.

Moody’s said the downgrade to a B3 corporate family rating reflects Progrexion’s underperformance following the December 2016 dividend recapitalization, due to slower revenue growth and significant rise in customer acquisition costs.

“Moody's believes the increased competition in digital media is driving the negative trends, which will persist and continue to pressure cash flow and elevate operating risk. Competition is making it much harder and more expensive for Progrexion to acquire new accounts and creating significant downward pressure on margins, which have declined by more than 1,000 basis points over the last three years,” the agency said in a news release.

“Moody's believes the company will be challenged to meaningfully improve earnings and cash flows in the near-term. As such, Moody's expects that over the next 12-18 months Progrexion's debt-to-EBITDA will remain in the mid 5.0 times.”

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