S&P trims Constant Contact

S&P said it lowered its ratings on Constant Contact Inc. and its first-lien debt to B- from B and its second-lien debt to CCC from CCC+.

“S&P Global economists believe that as prices begin to stabilize, the first interest rate cut will not be until mid-2024. Our economists also expect the fed funds rate will be 4% until late 2024 as the Fed commits to its "higher for longer" call. Constant Contact does not have any interest rate hedging instruments to soften the blow of higher rates. As a result, the company has and will continue to experience higher interest expense than expected in our previous forecast,” the agency said in a statement.

Constant Contact’s financial flexibility and cushion to absorb adverse business conditions have been eaten into by elevated interest rates, S&P said.

“More specifically, we now expect the company to generate about $25 million of free cash flow in 2023 compared with $45 million in our prior forecast. This change is largely driven by an increase in our expectation for interest expense to about $115 million in our current forecast from $105 million previously,” S&P explained.

The outlook is stable.

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