Investing.com -- S&P Global Ratings has lowered the credit rating of Altisource Portfolio Solutions S.A. following the completion of a distressed debt exchange on February 20, 2025. The company's issuer credit rating was downgraded to 'SD' from 'CC', while the rating on its senior secured term loan was reduced to 'D' from 'C'.

Altisource completed a debt exchange that decreased the principal balance of its senior debt by approximately $60 million, reduced the interest on its senior secured term loan, and extended the loan's maturity to April 2030. S&P Global Ratings views this exchange as distressed, as it believes the debtholders received less value than initially promised.

The debt exchange resulted in a roughly $73 million reduction in the principal balance of the senior secured term loan, lower interest on the term loan, and a maturity extension of five years. Despite the lenders receiving common shares amounting to 63.5% of the pro forma outstanding shares of the company, S&P Global Ratings believes this equity compensation did not sufficiently offset the losses for the lenders.

S&P Global Ratings also stated that without the exchange, Altisource might have struggled to repay the exchanged term loan due in April 2025. This is due to the company's strained operating performance and limited liquidity, even with the option to extend the term loan's maturity to April 2026.

S&P Global Ratings plans to reassess the issuer credit rating and debt ratings on Altisource over the next week. The agency believes that the debt exchange has improved Altisource's liquidity and interest coverage due to the debt reduction, interest savings, and maturity extension. S&P Global Ratings expects the cash savings from lower interest and the company's improving financial performance to assist Altisource in maintaining a positive cash flow. However, Altisource's liquidity remains limited, with $28 million in cash as of September 30, 2024. The issuer credit rating will stay at 'SD' until S&P Global Ratings reevaluates Altisource's creditworthiness following the distressed exchange.

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