Research Update: Harland Clarke Holdings Corp. Downgraded To 'B' On High Debt Leverage; Outlook Stable

U.S.-based payment solution and marketing services provider Harland Clarke Holdings Corp.'s (HCHC) credit measures remain weaker than we expected, including adjusted debt to EBITDA of about 5.9x for the 12 months ending March 31, 2018 (or 5.6x, pro forma for RetailMeNot and MaxPoint acquisitions in 2017). Operating performance through March 2018 was below our expectations, particularly in its Valassis segment because of lower volume in shared mail and free standing inserts (FSI), and we no longer expect the company to reduce adjusted leverage below our 5.0x downgrade threshold by the end of 2018. We are lowering our corporate rating on HCHC to 'B' from 'B+', and our issue-level ratings on the company's senior secured debt to 'B+' from 'BB-' and

...+ U.S.-based payment solution and marketing services provider Harland Clarke Holdings Corp.'s (HCHC) credit measures remain weaker than we expected, including adjusted debt to EBITDA of about 5.9x for the 12 months ending March 31, 2018 (or 5.6x, pro forma for RetailMeNot and MaxPoint acquisitions in 2017). + Operating performance through March 2018 was below our expectations, particularly in its Valassis segment because of lower volume in shared mail and free standing inserts (FSI), and we no longer expect the company to reduce adjusted leverage below our 5.0x downgrade threshold by the end of 2018. + We are lowering our corporate rating on HCHC to 'B' from 'B+', and our issue-level ratings on the company's senior secured debt to 'B+' from '##-' and on its senior unsecured notes to '###+' from 'B-'. + The stable outlook reflects our expectation that adjusted leverage will decline to the low- to mid-5x range and adjusted FOCF to debt will remain above 5.0% over the next 12 months....

Research Update