Investing.com -- S&P Global Ratings has upgraded the credit rating of Altisource Portfolio Solutions S.A. to ’CCC+’ from ’SD’, citing the company’s reduced debt and cash interest burden. The rating agency also highlighted the extension of the company’s debt maturity to April 2030, achieved through a distressed debt exchange.

The rating agency expects Altisource to generate positive cash flow from operations, although it anticipates that liquidity will remain constrained. As part of the upgrade, S&P Global Ratings also assigned a ’B’ issue-level rating and ’1’ recovery rating to the new $12.5 million senior secured debt, known as the super senior facility. A ’CCC-’ issue-level rating and ’6’ recovery rating were assigned to the new $160 million senior subordinated debt, or the new first lien loan. Ratings were withdrawn from the company’s exchanged senior secured term loan, which was previously rated ’D’.

The stable outlook for Altisource reflects S&P Global Ratings’ expectation that the company will continue to generate positive cash flow from operations over the next 12 months. However, the agency believes that Altisource’s liquidity will remain constrained and the company will continue to rely on favorable financial and economic conditions to meet its financial commitments.

The recent debt exchange has improved Altisource’s liquidity and interest coverage due to debt reduction, interest savings, and maturity extension. The company’s improved financial performance and the cash savings from lower interest are expected to contribute to positive cash flow from operations. S&P Global Ratings expects the company’s EBITDA interest coverage to remain above 1x, despite viewing Altisource’s business model as dependent on favorable financial and economic conditions.

As of September 30, 2024, Altisource had $28 million in cash on its balance sheet. Going forward, the company plans to use 75% of its excess cash flow to repay debt, as long as the cash on balance sheet exceeds $30 million. This could lead to further reductions in debt principal and interest savings, but S&P Global Ratings does not expect liquidity to increase significantly above $30 million for the next 12-24 months.

The ratings could be lowered over the next 12 months if Altisource is deemed to have insufficient liquidity to sustain 12 months of operations or if the company undertakes exchange offers or debt restructuring that is viewed as distressed. Conversely, the ratings could be raised if Altisource is able to sustain positive cash flow from operations, maintain EBITDA interest coverage comfortably above 1.5x, and if the company’s business environment improves. Any upgrade would also depend on Altisource maintaining adequate liquidity while repaying debt with excess cash flow over the next 12 months.

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