New York, April 09, 2019 -- Moody's Investors Service ("Moody's") downgraded
CROSSMARK Holdings, Inc.'s ("CROSSMARK")
ratings following the deemed limited default by virtue of a missed interest
payment on its second lien term loan and the subsequent expiration of
the five business day grace period. Moody's downgraded the
Corporate Family Rating ("CFR") to Ca from Caa3, the
Probability of Default Rating to C-PD/LD from Caa3-PD,
the senior secured first lien bank credit facilities rating to Ca from
Caa2 and the second lien term loan rating to C from Ca. The ratings
outlook is stable.
CROSSMARK failed to make its interest payment on its second lien term
loan on March 29, 2019 and the five day grace period expired on
April 5, 2019. Prior to the missed interest payment,
CROSSMARK entered into a Restructuring Support Agreement on December 31,
2018 which included a forbearance of the March interest payment.
Given CROSSMARK's unsustainably high leverage and the 2019 maturities
of its first lien bank credit facilities, Moody's expects
that a restructuring of CROSSMARK's debt is imminent.
The following ratings are downgraded:
..Issuer: CROSSMARK Holdings, Inc.
.... Probability of Default Rating,
Downgraded to C-PD /LD from Caa3-PD
.... Corporate Family Rating, Downgraded
to Ca from Caa3
....Senior Secured First lien Revolving Credit
Facility, Downgraded to Ca (LGD4) from Caa2 (LGD3)
....Senior Secured First Lien Term Loan,
Downgraded to Ca (LGD4) from Caa2 (LGD3)
....Senior Secured Second Lien Term Loan,
Downgraded to C (LGD6) from Ca (LGD5)
Outlook Actions:
..Issuer: CROSSMARK Holdings, Inc.
....Outlook, Changed To Stable From
Negative
RATINGS RATIONALE
CROSSMARK's Ca CFR reflects expectations of an imminent debt restructuring
as a result of its unsustainably high leverage, weak liquidity and
near dated debt maturities. It also reflects Moody's view
of a lower than average recovery given CROSSMARK's weak earnings
trend and limited tangible assets. CROSSMARK's $52.5
million revolving credit facility expires on June 30, 2019 and its
approximately $400 million first lien term loan comes due on December
21, 2019. For the twelve months ended September 30,
2018, CROSSMARK's debt-to-EBITDA was 10.9x
(inclusive of Moody's lease adjustments) and EBITA-to-interest
expense was 0.9x.
The stable outlook acknowledges Moody's view that the likely outcome is
out of court debt restructuring and that the ratings fully reflect Moody's
anticipated recovery levels.
CROSSMARK's ratings could be upgraded should it successfully achieve
an out of court restructuring of its debt maturities which results in
a sustainable level of debt and interest expense going forward with an
adequate liquidity profile.
CROSSMARK's probability of default rating could be downgrade to
D should it pursue a formal reorganization under US Bankruptcy Code.
The principal methodology used in these ratings was Business and Consumer
Service Industry published in October 2016. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
methodology.
Headquartered in Plano, TX, CROSSMARK Holdings, Inc.
is a sales and marketing services company in the consumer goods industry
that provides services to consumer products companies, manufacturers
and retailers. The company operates three business segments:
Sales Agency, Marketing Services, and International.
The Sales Agency includes the management of headquartered sales activities,
category and space management, and retail services such as routine
store coverage and project work. Marketing services includes in-store
product demonstrations and sampling, experiential marketing,
and data collection. The company is currently owned by affiliates
of Warburg Pincus. For the twelve months ended September 30,
2018, revenues were below $700 million.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Margaret Taylor
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Russell Solomon
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
