Moody's downgrades Avalign

Moody's Investors Service said it lowered Avalign Holdings Inc.’s ratings, including the company's corporate family rating to Caa1 from B3 and senior secured first-lien credit facilities to B3 from B2.

“The rating downgrades reflect the company's weak liquidity, incorporating $5 million available under the company's $35 million revolver (expiring in December 2023) and $15 million in cash on the balance sheet as of March 31, 2022, as well as Moody's expectation for slightly negative free cash flow in FY2022. Moody's notes that Avalign's liquidity needs in FY2021 and the first quarter of FY2022 were supported by equity infusions from the company's private equity owners,” the agency said in a press release.

“The rating downgrades also reflects the company's recent underperformance that has contributed to rising leverage (approximately 9.1x debt/EBITDA on Moody's adjusted basis as of March 31, 2022),” the agency added.

On a positive note, Moody's noted Avalign has a strong pipeline of new business wins, which requires near-term investment in capital spending and working capital and will probably hinder any positive free cash flow generation in FY2022.

The outlook is stable.

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