Moody's slashes Cyxtera

Moody's Investors Service said it downgraded Cyxtera DC Holdings, Inc.'s corporate family rating to Caa2 from B3 and its probability of default rating to Caa2-PD from B3-PD. The agency also cut to Caa2 from B3 Cyxtera's senior secured first-lien credit facility, consisting of a $120.1 million revolver due November 2023 and about $869 million of outstanding term loans due May 2024. The outlook was changed to negative from stable.

“The downgrades and change in outlook to negative reflect, in part, Cyxtera's governance weaknesses, including aggressive financial strategy and risk management practices and an inconsistent track record as evidenced by the company's protracted and still unsuccessful efforts to facilitate a refinancing of its revolver well in advance of a Nov. 1, 2023, maturity ($42 million was outstanding as of Sept.30, 2022) as Moody's had previously expected,” the agency said in a statement.

The agency noted Cyxtera and its term loan lenders hired advisors and lawyers to help in refinancing talks.

“While Moody's believes Cyxtera's underlying business fundamentals, bookings trends and demand-driven capital spending remain solid growth drivers, the company's near-term debt maturities and negative free cash flow over the next two years heighten liquidity pressures. Cxytera's capital structure is currently untenable without better visibility into its refinancing path progress. Moody's believes the possibility of default via distressed debt exchanges or a restructuring over the next few months is a significant and increasing risk,” the agency said.

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