Sorenson Communications Inc., the communication services provider to deaf and hard-of-hearing individuals owned by GTCR Golder Rauner LLC and Madison Dearborn Partners LLC., may not be able to repay bank debt that expires in October 2014, according to Standard & Poor’s.
The ratings firm on Sept. 13 lowered the corporate credit grade on the company by two levels to CCC from B-, with a “negative” outlook reflecting “significant refinancing risk” that could “pressure liquidity and cause a payment default,” S&P analysts Christopher Thompson and Chris Valentine wrote in a report that day.
The Salt Lake City, Utah-based company’s $550 million term loan that was obtained in March began paying interest at 8.25 percentage points more than the London interbank offered rate with a 1.25 percent minimum on the lending benchmark, according to data compiled by Bloomberg.
“We continue to view Sorenson Communication’s financial risk profile as ‘highly leveraged,’” the analysts wrote. “We could lower the rating if operating performance is weaker than expected or if the company is unable to address its 2014 and 2015 debt maturities within the next six months.”
Sorenson’s $735 million of 10.5 percent bonds due in 2015 traded at 81.2 cents on the dollar to yield 26 percent on July 10, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Sorenson had a lease-adjusted debt to earnings ratio of 6.2 times as of June 30, according to S&P. It had a cash balance of $80 million and an undrawn $25 million revolving line of credit. The company is expected to have a discretionary cash flow deficit of between $5 million and $10 million for 2013, according to S&P.
In a revolving credit line money can be borrowed again once it’s repaid; in a term loan it can’t.