Altisource Portfolio Solutions S.A.

The negative outlook on Altisource reflects our view that over the next 12 months, the tough operating conditions will continue to pressure operations and the company will struggle to generate positive cash flows owing to the low residential mortgage delinquencies and foreclosures. We could lower the ratings over the next 12 months if: We believe Altisource's liquidity is not able to sustain another 12 months of operations, or The company executes exchange offers or debt restructuring on its senior secured term loan due April 2024 that we would view as distressed. We could revise the outlook to stable if we think Altisource could sustain EBITDA interest coverage above 1.5x, generate positive cash flow from operations, and refinance the senior secured

...Altisource Portfolio Solutions S.A. currently has negative cash flow because of its largely countercyclical business model, which is highly dependent on mortgage foreclosures and delinquencies. With most of its revenue correlating with the level of mortgage foreclosures and delinquencies, Altisource has been hurt by the moratorium on foreclosures from the CARES Act. Although the moratorium ended in 2021, foreclosure initiations and defaults remain below pre-pandemic levels, hurting the company's cash flow generation and EBITDA in 2022. However, Altisource's operations could benefit from a rise in foreclosures and delinquencies in a recession. We believe Altisource will likely be strained for liquidity to support operations and to address its upcoming term loan maturity over the next 12-18 months. The company ended second-quarter 2022 with $70.7 million of cash and cash equivalents, and we anticipate it will lose $5 million to $10 million of cash per quarter for the next couple quarters....

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