S&P revises Avalign view downward

S&P said it revised the outlook for Avalign Holdings Inc. to negative from stable and affirmed the B- ratings on the company and its first-lien debt. The 3 recovery rating is unchanged.

“Our revised outlook follows Avalign Holdings Inc.’s underperformance in 2019 and reflects our expectations for continued modest discretionary cash flow deficits in 2020. The company’s operating performance missed our EBITDA and cash flow expectations in 2019 because of higher-than-expected costs and increased working capital outflow,” said S&P in a press release.

S&P projects cash flow deficits will persist into late 2020, compared to the agency’s prior forecast of modest discretionary cash flow generation. As a result, S&P projects higher leverage than previously expected and see increased liquidity risks.

“We also expect Avalign’s funded leverage to remain over 7x (over 16x including preferred equity) in 2019 and 2020, as we expect it to remain acquisitive and because its financial sponsor ownership will likely prioritize shareholder-friendly activities over permanent debt repayment,” S&P said.

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