S&P Revises Cenveo Outlook to Negative

STAMFORD, CT—Standard & Poor's (S&P) Ratings Services has revised its ratings outlook on Cenveo Inc. to negative from stable. It also reaffirmed its ratings on the company, including the 'B' corporate credit rating. According to S&P, the negative outlook reflects the potential for a downgrade if Cenveo continues to have a significant balance under its 2013 note as the date of the maturity approaches.

Earlier this month, the company launched a $450 million senior unsecured note transaction with the intention of partially funding tender offers for its 7.875 percent notes due 2013 ($271 million outstanding), its 10.5 percent notes due 2016 ($23 million outstanding), and its 8.375 percent notes due 2014 ($165 million outstanding), as well as related fees and expenses. The offering has been downsized to $225 million. In addition, the company now plans on issuing up to $86.25 million of convertible notes. Cenveo still intends to use the proceeds of the revised offerings to fund tender offers for the 2013, 2016, and 2014 notes. However, the company will now only pay down $120 million of the notes due 2013, leaving $151 million maturing in 2013.

The corporate credit rating on Cenveo reflects Standard & Poor's expectation that the company's leverage will remain high and coverage will remain weak. It considers Cenveo's financial profile "highly leveraged" (based on S&P criteria) and views the company's business risk profile as "weak" (also based on S&P criteria) because of Cenveo's participation in the highly competitive and cyclical printing markets. S&P expects ongoing pricing pressure from industry overcapacity and limited scope for margin improvement. Over the near term, S&P expects this will result in minimal organic revenue and EBITDA growth.