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Diebold Debt Dives Deeper into Distressed on S&P Downgrade

diebold logoBonds backing Diebold Nixdorf tumbled another 12.5 points today, falling deeper into distressed territory at 57.5, trade data show, after the issuer was tagged with a two-notch S&P Global Ratings downgrade after the closing bell yesterday. The notes have now slid 34.5 points so far this month, from closing July levels around 92, and are down about 21.25 points week-over-week, according to MarketAxess.

Meanwhile, the issuer’s dollar B term loan due November 2023 (L+275, 0% LIBOR floor) was quoted at 84.625/86.25 on Thursday, indicating a week-over-week decline of roughly 10 points, sources said. The issuer’s euro-denominated B term loan (E+300, 0% LIBOR floor) was quoted at 83.625/85.75, from a Monday context of about 96.5. Both term loans were placed in April 2017, totaling $475 million and  €415 million respectively, with proceeds backing Diebold’s acquisition of Wincor Nixdorf.

After flagging covenant concerns on the issuer’s quarterly earnings release last week, creditors were again jolted by Monday’s filing of Diebold’s 10-Q with the SEC, which revealed that Diebold Nixdorf shareholders earlier this month requested redemption of roughly 2.4 million shares with a value of about $160 million. The company expects to use balance-sheet cash and borrowings under its revolving facility to fund the obligations, according to the filing. Diebold reported total cash of roughly $299 million at the end of the quarter. The filing also cautioned that the borrower is at risk of violating certain maintenance covenants governing its credit agreement as soon as this quarter.

S&P Global on Wednesday lowered the issuer’s corporate rating to B, from BB–, with a negative outlook, from stable previously, citing leverage concerns and the company’s ongoing efforts to amend is credit facility to avoid a maximum net leverage covenant violation. The ratings agency also cut Diebold’s secured and unsecured debt ratings to B and B–, respectively, from BB– and B+.

“Further weakening its near-term performance is the company’s newly announced DN Now multi-year business improvement and savings plan (which requires high costs in 2018), which comes after previous unsuccessful tries and at a time when the company is operating at its lowest liquidity level since the transformative acquisition of Wincor Nixdorf AG in 2016,” according to the Wednesday report.

Moody’s on Tuesday downgraded the issuer’s corporate rating by two notches, to B3, from B1, and revised its outlook to negative, from stable. The agency also cut its ratings on the company’s first-lien credit facilities to B3, from B1, as well as those on Diebold’s senior unsecured notes to Caa2, from B3.

Moody’s said the moves were driven by Diebold’s recent weaker-than-expected operating performance, meaningfully diminished liquidity, and the agency’s expectation that the company will face continued operating challenges in the coming year.

Diebold Nixdorf (NYSE: DBD) provides commerce services, software, and technology. — James Passeri/Mairin Burns

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