S&P cuts SolarWinds

S&P said it downgraded SolarWinds Holdings Inc. and its senior secured debt to B from B+ and removed the ratings from CreditWatch with negative implications, where they were placed Dec. 22.

“The downgrade reflects our expectation that SolarWinds' S&P Global Ratings-adjusted gross leverage will be sustained above 6x over the next 12 months, which is above our downside trigger for the current rating. While the pace of the company's new sales appears healthy and it provided better-than-expected preliminary results for the March quarter, a combination of EBITDA losses from the N-able divestment (about $121 million), the lack of a reduction in its debt following the divestment, costs related to the Sunburst breach (less than $25 million), and modestly lower revenue in 2021 will cause its S&P Global Ratings-adjusted leverage to remain elevated,” S&P said in a press release.

However, the agency noted SolarWinds handled the fallout from the software breach well, but it expects a decline in subscription renewals.

S&P noted SolarWinds provided preliminary results from the March 2021 quarter that exceeded its base-case expectations for revenue and EBITDA

The outlook is stable.

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