ScribeAmerica Intermediate Holdco LLC

The stable outlook on Scribe reflects our expectation that the company will continue to grow, primarily through organic means, while expanding its margins and realizing acquisition synergies. We anticipate that it will use its resources to fund future acquisitions while maintaining leverage between 4x and 5x over the next two years. We could consider lowering our rating on Scribe if: Its margin contracts by 100-200 bps from our expectation in 2021 and we expect it to remain lower. We believe this could be due to the inability to achieve expected cost reductions, increased costs from changes in regulations, or heightened competition from new market participants that run a leaner business. This contraction could also be caused by operational issues arising

...We expect adjusted leverage between 8x and 8.5x in 2020, declining below 7x in 2021, with good free cash flow. The adverse impact of the pandemic in 2020 will result in leverage higher than our earlier expectation of about 6x. However, given our estimate of the pace of recovery, but also considering the potential for some lingering effects in 2021, we expect leverage to fall below 7x in 2021. Given the business' low capital intensity, we expect ScribeAmerica to generate free cash flow of about $20 million in 2021. We believe the financial sponsors will favor shareholder returns, mergers and acquisitions, and reinvestment over permanent debt reduction keeping adjusted leverage above 5.0x. We expect margins to be higher than our prior expectations. The company has good potential for margin improvement. During the pandemic, Scribe took the opportunity for a deep dive review of its business operations, identifying and implementing several initiatives for cost savings. We believe these measures,...

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