Research Update: Cobra Holdings Inc. Outlook Revised To Negative On Weak Free Operating Cash Flow, Senior Secured Debt Rating Lowered

Investment management software and solutions provider Cobra Holdings Inc. (doing business as Confluence) is burning cash, primarily due to prolonged acquisition integration challenges. We forecast the company's free operating cash flow (FOCF) deficit will widen in 2023, compared with 2022, before improving to about breakeven in 2024. The company recently issued a $75 million incremental term loan (not rated), which it used to repay the outstanding borrowings on its fully drawn revolver and put cash on the balance sheet. Therefore, we revised our outlook on Confluence to negative from stable. At the same time, we lowered our issue-level rating on its senior secured first-lien credit facilities to 'B-' from 'B' and revised the recovery rating to '3' from '2' due

...- Investment management software and solutions provider Cobra Holdings Inc. (doing business as Confluence) is burning cash, primarily due to prolonged acquisition integration challenges. We forecast the company's free operating cash flow (FOCF) deficit will widen in 2023, compared with 2022, before improving to about breakeven in 2024. - The company recently issued a $75 million incremental term loan (not rated), which it used to repay the outstanding borrowings on its fully drawn revolver and put cash on the balance sheet. - Therefore, we revised our outlook on Confluence to negative from stable. At the same time, we lowered our issue-level rating on its senior secured first-lien credit facilities to 'B-' from 'B' and revised the recovery rating to '3' from '2' due to the increase in first-lien debt. - The negative outlook reflects the potential we will lower our ratings if the company underperforms our forecast and we believe it will generate sustained FOCF deficits....

Research Update