Lexmark Receives Favorable Report Card

Lexmark Receives Favorable Report Card

According to the Fitch Ratings, Lexmark’s credit rating and an analysis of its financial outlook is looking stable.

Fitch Ratings Inc. is an American credit rating agency and is one of the “Big Three credit rating agencies”, the other two being Moody’s and Standard & Poors. It is one of the three nationally recognized statistical rating organizations designated by the U.S. Securities and Exchange Commission in 1975.

The report has come back and Lexmark  International II LLC’s and Lexmark International Inc.’s Long-Term Issuer Default Ratings (IDR) has been graded at ‘B-‘.

The ratings and outlook reflect Lexmark’s recent operational performance which has generally been in line with Fitch’s expectation and better than larger print market competitors. Additionally, the company repaid its 2020 notes in March. The coronavirus pandemic has had less of an impact on the company’s results than others in the printing market, and more broadly among U.S. corporates. Fitch believes the company’s revenue will decline to the high single-digit in 2Q20 and mid-single in 3Q20 before stabilizing in the fourth quarter, which is consistent with the ongoing normalization.

Lexmark faces an additional $128 million of term loan amortizations over the remainder of 2020 and $249 million in 2021. Additionally, $200 million in revolver facilities are due for renewal/extension upon maturity in 2021. Ninestar Corporation and PAG Asia Capital have committed to providing $75 million of liquidity to meet financial obligations to the extent that the company is not able to generate incremental positive cash flow over the remainder of the year.

Lexmark states it has access to the private and public debt markets but has not been able to successfully complete a transaction thus far. However, pro forma to the contribution commitment, Lexmark had in excess of $200 million of liquidity available, which should be sufficient to meet its operational needs for the remainder of the year and into 2021. The potential for lender forbearance could further improve the company’s liquidity position.

Fitch will provide a further update should the impact of the coronavirus pandemic changes for the worse.

Related:

• Callow Teams Up with Lexmark to Cut Red Tape

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