Research Update: Magenta Buyer LLC Downgraded To 'CCC' From 'CCC+' On Increased Default Risk; Outlook Negative; Debt Ratings Also Lowered

We expect Magenta Buyer LLC (doing business as Trellix and Skyhigh Security) to miss its 2024 budget projections and its liquidity to be under pressure throughout fiscal 2024. Given the ongoing cash burn driven by elevated interest expense and continued decline in its non-recurring revenues, we see an increased risk of default in the form of a distressed exchange, missed payment, or bankruptcy filing over the next 12 months. As a result, we lowered our issuer credit rating on Magenta Buyer to 'CCC' from 'CCC+' and assigned a negative outlook. At the same time, we lowered our issue-level rating on the company's first-lien credit facility to 'CCC' from 'CCC+', and our issue-level rating on its second-lien term loan to 'CC'

...- We expect Magenta Buyer LLC (doing business as Trellix and Skyhigh Security) to miss its 2024 budget projections and its liquidity to be under pressure throughout fiscal 2024. Given the ongoing cash burn driven by elevated interest expense and continued decline in its non-recurring revenues, we see an increased risk of default in the form of a distressed exchange, missed payment, or bankruptcy filing over the next 12 months. - As a result, we lowered our issuer credit rating on Magenta Buyer to '###' from '###+' and assigned a negative outlook. - At the same time, we lowered our issue-level rating on the company's first-lien credit facility to '###' from '###+', and our issue-level rating on its second-lien term loan to '##' from '###-'. - The negative outlook reflects Magenta Buyer's deteriorating liquidity and our view that Magenta Buyer's capital structure is unsustainable without meaningful improvements in profitability and revenues from current levels. We expect 2024 free cash flow...

Research Update