S&P cuts Zywave

S&P said it lowered its ratings for Zywave Inc. (Cardinal Parent Inc.) and its first-lien debt to CCC+ from B- and its second-lien debt to CCC- from CCC.

“Acquisitions and continued negative FOCF have reduced Zywave's financial flexibility, compounding the risk of a near-term liquidity crisis. Acquisitions and related charges strained Zywave's liquidity in 2022, with the company spending nearly $50 million for the purchase of Strategic Insurance Software, plus another $60 million tied to a deferred earnout payment on its 2021 purchase of ClarionDoor,” S&P said in a press release.

The agency noted that Zywave raised nearly $40 million in combined incremental long-term debt and preferred equity, and obtained a sponsor capital infusion of nearly $90 million. “FOCF of negative $60 million resulted in continued revolver draws in 2022 as well, and Zywave finished the year with $47 million drawn on its $70 million revolver.”

“With negative mid-teens millions FOCF expected for the remainder of the year, combined with the company's mandatory amortization payments, we anticipate that Zywave may be unable to meet near-term liquidity needs without external sponsor support should FOCF underperform projections,” S&P said.

The outlook is stable.

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