Auction.com Holding Co. Inc.

The stable outlook reflects our expectation that near term revenue headwinds stemming from regulatory restrictions on foreclosures will temporarily increase lease-adjusted leverage to the mid-8x area for Auction.com in 2020 but leverage will subsequently improve toward the 5x range. We expect that free operating cash flow (FOCF) to debt will remain positive, above 5%, over the next 12 months and liquidity sources from cash balances, revolver availability, and cash generation will be sufficient to cover needs over the next 12 months and beyond. We could lower our ratings if the company exhibits sharp declines in revenue and cash flow generation relative to our forecasts due to unfavorable market conditions for the distressed residential real estate market such as natural disasters,

...We expect the company to experience significant revenue decline in 2020 before bouncing back in 2021. The economic slowdown induced by the COVID-19 pandemic has led to soaring unemployment rates and continually increasing mortgage delinquency rates. However, countermeasures such as foreclosure moratoriums on federal-backed mortgages (under CARES act) along with state and municipality level restrictions against foreclosures and evictions, have resulted in record low foreclosure activity in the U.S. Stay-at-home orders have further brought down offline real estate and court activities. We expect these factors to result in lower revenue generation for Auction.com Holding Co. Inc. in the second and third quarters of 2020, because the company derives more than half of its revenue from the auction of foreclosed properties on its online platform. We expect the pent-up foreclosure activity to surge in 2021, once the current forbearance provisions as well as any future policy support come to an...

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