S&P views Constant Contact to negative

S&P said it changed its outlook for Constant Contact Inc. to negative from stable and affirmed all its ratings, including B senior secured loan ratings.

“Constant Contact has significant exposure to rising interest rate risk. The company's capital structure is composed of floating-rate debt that will increase interest expense more than we previously forecast,” the agency said in a press release.

Given the Federal Reserve’s interest-rate hikes, which will lead to higher Libor rates, S&P said it estimates the company’s interest expense could be about $95 million in 2023 compared with its original forecast of about $70 million.

“Therefore, we project free operating cash flow (FOCF) to debt of about 5% in 2023 compared with our prior expectations approaching 10%,” S&P said.

The negative outlook reflects the possibility of a downgrade, if Constant Contact cannot deliver FOCF to debt in excess of 5%; or debt to EBITDA is sustained above 7x, the agency said.

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