S&P cuts Digital Media Solutions

S&P said it lowered the issuer credit rating on Digital Media Solutions Inc. to SD (selective default) from CCC and the issue-level ratings on its senior secured revolver and term loan to D from CCC.

Digital Media Solutions entered into a second amendment to its credit agreement, extending the option for the company to convert its cash interest to payment in kind (PIK) through the first quarter of 2025.

The amendment also created a new incremental $22 million senior secured tranche A term loan commitment and exchanged $66 million of original debt principal into a new senior secured tranche B term loan.

“It is our understanding that the tranche A and B term loans will rank ahead in priority over the company's other senior secured obligations,” S&P said in a news release.

“We consider this a distressed exchange and tantamount to default because we anticipate the company will need to exercise the PIK interest option, given its distressed financial position. This will result in slower timing for cash payments, which we expect will cause investors to receive less value than originally promised.

“We also view the transaction as a distressed debt restructuring, as we believe the original term loan and revolver lenders now rank lower in priority than the tranche A and B lenders, without adequate offsetting compensation.”

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