S&P lowers Kofax

S&P said it lowered its ratings for Kofax and its first-lien term loan to B- from B and its second-lien term loan to CCC from CCC+.

“We expect slight negative FOCF in 2023 due to greater interest payments and the recurring revenue transition, but liquidity remains sufficient. The rating action reflects our expectation of weak FOCF generation over at least the next two years. With Kofax's greater debt balance following the secondary buyout transaction last year and a large increase in interest rates over the last 12 months, we now expect cash interest payments to increase to $170 million-$180 million in 2023 from $120 million-$130 million in 2022 and just above $75 million in 2021,” the agency said in a statement.

However, S&P said it does forecast Kofax’s leverage to improve just above 7x in 2023. “We believe leverage could reduce below 7x in 2024 if the company returns to organic revenue growth from greater recurring revenue contributions. In the long run, we believe there is the potential for greater operating leverage in the business and more cash flow visibility as the recurring revenue mix increases.”

The outlook is stable.

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