S&P Puts Cenveo Credit Rating on Negative Watch

NEW YORK—Standard & Poor’s (S&P) Ratings Services placed all ratings for Stamford, CT-based Cenveo Inc., including the "B" corporate credit rating, on CreditWatch with negative implications. The CreditWatch placement reflects Standard & Poor’s expectation that the company may not have enough liquidity to pay down its 7.875 percent senior unsecured notes by mid-2013.

If the notes are not fully repaid by June 1, 2013, the maturity date of the revolving credit facility and term loan will be accelerated to Sept. 2, 2013. As of the company's second quarter earnings call on Aug. 9, 2012, $98.5 million of the 7.875 percent senior unsecured notes remained outstanding.

Over the next year, S&P expects Cenveo's leverage to remain high and liquidity to remain limited, with significant debt maturities in 2013. Thus, it consider Cenveo's financial profile “highly leveraged,” based on S&P criteria.

“We view the company's business risk profile as weak because of Cenveo's participation in the highly competitive and cyclical printing markets,” the report said. “We expect ongoing pricing pressure from industry overcapacity and limited scope for margin improvement. Over the near term, we expect this to result in lower organic revenue and make any EBITDA gains unlikely without cost reduction.”

S&P said there was a remote possibility that Cenveo's outlook could be revised to stable, should it reduce its 2013 debt maturities meaningfully by the end of 2012, and S&P becomes confident that the printer will generate enough cash flow and have enough revolving credit facility capacity to meet this obligation, while establishing a margin of compliance healthily above 10 percent.