Getty Images Inc. should avoid taking on more debt and instead issue new equity to raise the capital it needs to improve its business and drive profit growth, according to a recommendation from Moody’s Investors Service.
The stock image provider, which is controlled by the private-equity firm Carlyle Group LP, said to investors this week on a private earnings call that it hired Guggenheim Securities LLC to explore raising additional debt. The new debt would be used to “provide supplemental funds for investment in key growth initiatives,” people with knowledge of the matter told Bloomberg on Wednesday.
Since Getty has “very high leverage and limited free cash flow,” new capital for growth investments “should be largely in the form of equity to avoid negative rating actions,” Moody’s said in the statement. The credit grader added that “absent equity injections or other financial support” Getty’s potential for a restructuring or distressed debt exchange would increase. Either of those would be considered a limited default, Moody’s said.
Getty has been struggling as more competitors such as Shutterstock Inc. and Adobe System Inc.’s Fotolia LLC pile into the stock photo business. The company reported rising earnings in July for the first time in at least three quarters as its smaller business lines improved, people with knowledge of the matter said last month.
Sarah Lochting, a spokeswoman for Seattle-based Getty, and Randy Whitestone, a spokesman for Carlyle, declined to comment.