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Moody’s cuts Syniverse, debt; rates notes Caa3
Moody's Investors Service said it downgraded Syniverse Holdings, Inc.’s corporate family rating to Caa1 from B3.
The downgrade primarily reflects the company’s sustained high leverage of about 8 times (Moody's adjusted).
The agency also downgraded Syniverse's probability of default rating to Caa1-PD from B3-PD, unsecured rating to Caa3 from Caa2 and secured rating to B3 from B2.
Additionally, Moody's assigned a Caa3 rating to Syniverse's proposed senior unsecured notes, which are being issued in connection with the recently announced exchange transaction.
The outlook remains negative reflecting the company's high leverage and the possibility that the exchange transaction could be classified as a Distressed Exchange (DE) and considered a default under Moody's definition.
The agency said the downgrade reflects its view that Syniverse has made insufficient progress in managing its very high leverage and looming 2019 maturities of roughly $2 billion of debt. As of Sept. 30, it had leverage of 8.1 times (including Moody's standard adjustments), which Moody's believes is unsustainable for Syniverse.
Moody's estimates that leverage will remain near 8 times over the next 12 to 18 months, with potential improvement coming from debt reduction due to mandatory cash flow sweeps.
As the wireless industry transitions technology over the next two to three years, the agency said it believes a portion of Syniverse's legacy revenue and earnings will continue to erode. The company has successfully taken costs out of the business leading to modest margin expansion, but the rate of decline in its legacy operations continues to outpace the observed improvements.
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