Fitch cuts Lexmark to BB-, notes to BB

Fitch Ratings said it downgraded Lexmark International, Inc.’s long-term issuer default rating to BB- from BB and senior notes to BB/RR3 from BB+/RR1.

The agency also assigned a BB- long-term issuer default rating to Lexmark International II, LLC.

The outlook is negative.

Fitch said the actions reflect Lexmark's weak first quarter 2017 results, the expectation that the company's full year 2017 operating performance will be substantially lower than originally anticipated and an abrupt leadership transition.

All of these factors increased uncertainty that the company will successfully execute its growth strategy.

“Fitch expects Lexmark's leverage profile to remain substantially elevated over the ratings horizon as it attempts to increase hardware placements, particularly in China, and as it seeks to stabilize large, persistent declines in its supply business,” the agency said in a news release.

“Additionally, Fitch anticipates Lexmark will generate sizable negative free cash flow in 2017, pressuring near-term liquidity given minimal domestic cash balances and no further capacity on its revolving credit facility.”

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