S&P snips Southern Graphics

S&P said it downgraded Southern Graphics Inc. and its first-lien term loan to CCC+ from B- citing sustained operating weakness. The agency also cut the rating on Southern Graphic’s second-lien term loan to CCC- from CCC. The recovery ratings on the loans are unchanged.

“The downgrade reflects Southern Graphics’ continued underperformance, mainly driven by secular pressures within the company’s main client base—CPG companies. As marketing budgets at these companies shrink or are reallocated, Southern Graphics is experiencing volume and pricing pressures and we forecast this will continue over the next 12–24 months. These trends have adversely affected the company’s revenue, EBITDA margin, and cash flow generation,” said S&P in a press release.

S&P said it sees adjusted leverage staying above 8x and capital spending staying elevated over the next 12 to 24 months, which could hurt liquidity and hasten refinancing risks.

The outlook is negative.

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