WEX Inc.

S&P Global Ratings' negative outlook on WEX reflects a slowing economy, uncertainty about the company's ability to walk away from recent debt-financed acquisitions, and elevated leverage. We expect net debt to EBITDA to exceed 6.0x, funds from operations (FFO) to debt to be 10%-20%, and interest coverage to be 3.0x-4.0x through 2022. We could lower the rating over the next 12 months if WEX's net debt to EBITDA sustains above 6.5x or if EBITDA coverage of interest falls below 2.5x. Separately, we could lower the rating if the company approaches its total leverage covenants, which is subject to step-downs. An upgrade is unlikely over the next 12 months. We could revise the outlook to stable if the company lowers its

...The COVID-19 pandemic will hurt earnings from WEX's travel/corporate and fleet payment segments. WEX's April global spend volumes were down approximately 90% in the travel business, and payment processing transactions were down approximately 20% in the fleet segment. We expect the second quarter to be the most affected and volumes to rise to more normal levels as shelter-in-place orders are lifted. WEX is looking to curb expenses. The company announced on its first-quarter earnings call that it expects to save approximately $60 million from reducing headcount and cutting executive compensation. These changes will help stabilize WEX's ascending leverage metrics, although they won't be enough to offset the declines elsewhere. WEX's decision to walk away from its acquisition of eNett and Optal is being litigated by the sellers and ultimately could still impact leverage. WEX said the pandemic, along with related macroeconomic conditions, had a material adverse effect on the businesses. Because...

Full Report