Fitch slices Magenta Buyer

Fitch Ratings said it downgraded Magenta Buyer LLC's (Trellix and Skyhigh Security and formerly McAfee Enterprise) long-term issuer default rating to CCC from B-. Fitch also slashed the first-lien term loan and revolver to CCC+/RR3 from B+/RR2 and the second-lien term loan to CC from CCC. The recovery rating remains RR6.

“The downgrade reflects Magenta Buyer's reduced liquidity position, ongoing revenue declines and CFO less capex to debt below 0% on a sustained basis. Fitch previously stated that negative rating action would occur if Magenta Buyer tripped these rating sensitivities.

“Fitch previously forecasted negative FCF for 2023 and 2024, however, the company has generated much worse negative FCF than expected and for the LTM ending Sept. 30, 2023, negative FCF was $257 million. The company's total liquidity was $198 million as of Sept. 30, 2023, down from $425 million Dec. 31, 2022,” the agency said in a press release.

Since the start of 2022, Magenta Buyer has had only two quarters of positive FCF and leverage rose to 7.3x for the last 12 months ending Sept. 30 from 6.2x at the end of 2022. Fitch said it forecasts the company’s leverage to be in the range of 8x to 8.5x at the end of 2023 and 2024.

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