S&P Global Ratings downgraded the issuer credit rating on Donnelley Financial Solutions Inc. to B+ from BB-, reflecting the rating agency's view that reduced capital markets transaction volume due to the coronavirus pandemic will lead to increased leverage and liquidity pressure.
The rating agency expects that the company's revenue declines will likely be "significant and challenging" to fully offset with cost reductions. Consequently, Donnelley Financial Solutions' leverage could increase and the covenant margin of compliance could tighten in the next 12 months.
The ratings outlook was revised to negative from stable, taking into account the uncertainty and downside risks stemming from the coronavirus outbreak on Donnelley Financial Solutions' operating performance. A greater-than-expected contraction in revenue could cause the company's credit metrics to remain elevated over a prolonged period and further shrink the covenant cushion.
The rating agency also lowered the issue-level rating on the company's senior secured credit facility to BB from BB+. Additionally, it affirmed the B issue-level rating on Donnelley Financial Solutions' senior unsecured debt with a change in recovery ratings to 5 from 6 following the repayment of the company's remaining term loan borrowings in 2019.
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