Extreme Reach Inc. Ratings Placed On CreditWatch Negative On Tight Covenant Cushion

Stocks and Financial Services Press Releases Thursday January 11, 2018 09:15
NEW YORK--11 Jan--S&P Global Ratings

NEW YORK (S&P Global Ratings) Jan. 10, 2018-- S&P Global Ratings today placed its ratings, including the 'B-' corporate credit rating, on U.S. advertising services company Extreme Reach Inc. on CreditWatch with negative implications.

The CreditWatch placement reflects our view that Extreme Reach will likely breach its covenants within the next two to three quarters without a covenant amendment. The company reported weaker-than-expected operating performance in the first nine months of 2017, which tightened its covenant cushion to just under 3% as of Sept. 30, 2017. We expect the covenant cushion to remain below 3% over the next two to three quarters as the covenant drops to 4.25x in the first quarter of 2018 and then to 4.0x by the third quarter when we expect the covenant breach to occur.

The CreditWatch placement reflects Extreme Reach's extremely tight covenant cushion and the uncertainty surrounding the outcome of any covenant amendment. Without a covenant amendment, Extreme Reach will likely breach its covenant by third-quarter 2018, when the covenant steps down to 4.0x. In resolving our CreditWatch placement, we would expect any covenant amendment to increase the covenant cushion to at least 10% over the next four quarters, and we will reassess the company's ability to maintain the covenant cushion at this level over time. A negative rating action could result in a two-notch downgrade.

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