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Moody's downgrades CPI Card Group over EMV card market headwinds

Moody's downgraded CPI Card Group Inc.'s corporate family rating to Caa1 from B3 and probability of default rating to Caa1-PD from B3-PD over "continued uncertainty" on whether the company can resume revenue and profit growth over the next 12 to 18 months.

Stephen Morrison, Moody's lead analyst, said the company's ability to make interest payments will be "strained" as it tries to maintain the capital expenditures required to retain its "prominent market position in a highly competitive market."

The agency expected pricing for Europay, MasterCard and Visa, or EMV, cards to remain "pressured," saying that it may keep declining at least through 2018. The agency said "continued lower pricing" and "relatively flat volumes" will put more pressure on the company's bottom line and creditworthiness.

The outlook is negative, which Morrison said, "reflects our expectation that CPI will continue to face headwinds in its core EMV card market in the form of 2018 volumes."

Recently, S&P Global Ratings also downgraded the company, saying its capital structure is "unsustainable" at current levels of EBITDA.

CPI Card Group is a provider in payment card production and related services.