S&P cuts GoTo

S&P said it downgraded its ratings for GoTo Group Inc. to SD, selective default, from CCC+ and its secured term loans and bonds to D from CCC+.

“The downgrade follows the pervasive effects of the debt restructuring on the capital structure. The below-par debt exchange affected substantially all the company's funded debt. We estimate approximately 72% of the total funded debt outstanding was exchanged for a mix of first-lien, first-out, and first-lien, second-out term loans and secured bonds due 2028. The exchange loans and bonds are unrated.

“GoTo's existing $250 million revolving credit facility was unaffected and was undrawn at the time of the exchange transaction. This facility was canceled and replaced by a new first-lien secured revolver expiring 2028,” S&P said in a press release.

The agency said it projects that remaining lenders will also exchange at a discount to par, which it will consider equivalent to default given that lenders received less than the original promise. “Additionally, we view a conventional default as a possibility given the company's growth challenges, cash flow deficits, and elevated debt to EBITDA of about 9.3x at Sept. 30, 2023.”

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