S&P Upgrades Cenevo, Inc. (CVO) to 'CCC+'; Outlook is Negative

Highlights:

• U.S.-based Cenveo Inc. (Cenveo) recently completed a distressed exchange that reduced its annual interest costs by approximately $18 million and eliminated its 2017 refinancing risk and about 7% of total funded debt.
• We are raising our corporate credit rating on Cenveo to 'CCC+' from 'SD' (selective default).
• We are also assigning our 'CCC-' issue-level rating and '6' recovery rating to Cenveo Corp.'s 6% senior unsecured notes due June 2024, and withdrawing our ratings on the company's 11.5% senior unsecured notes due May 2017 and asset-based lending revolving credit facility.
• The negative rating outlook reflects our expectation that Cenveo will struggle to refinance its $540 million 6% senior secured notes due August 2019, and our view that the company may need to participate in additional distressed exchange transactions to address its 2019 refinancing needs.

S&P Global Ratings said today that it raised its corporate credit rating on Cenveo Inc. (Cenveo)(NYSE: CVO) to 'CCC+' from 'SD' (selective default). The rating outlook is negative.

At the same time, we assigned our 'CCC-' issue-level rating and '6' recovery rating to Cenveo Corp.'s 6% senior unsecured notes due June 2024. The '6' recovery rating indicates our expectations for negligible (0%-10%) recovery in the event of a payment default.

We also withdrew our ratings on Cenveo Corp.'s 11.5% senior unsecured notes due May 2017 and asset-based lending (ABL) revolving credit facility.

Our issue-level and recovery ratings on Cenveo Corp.'s existing 6% senior secured notes and 8.5% second lien notes are unchanged.

"The upgrade follows our review of Cenveo's business prospects, liquidity, and capital structure after the company completed its recent distressed exchange transaction," said S&P Global Ratings credit analyst Minesh Patel. The 'CCC+' corporate credit rating reflects our view that the recent improvement in Cenveo's operating performance and liquidity may be insufficient for it to refinance its $540 million 6% senior secured notes ahead of the August 2019 maturity, absent additional capital structure restructuring transactions. The rating also reflects our view that the company's pro forma total debt to EBITDA of 8x for 2016 is excessive and unsustainable over the next three years, even though we don't expect a payment default to occur during the next 12 months.

"The negative rating outlook reflects our expectation that Cenveo may struggle to refinance its $540 million 6% senior secured notes due August 2019, given its excessive debt leverage," said Mr. Patel. "The outlook also reflects our view that the company could participate in additional distressed exchanges to address its 2019 refinancing needs."

We could lower our corporate credit rating on Cenveo to 'CCC' or lower if we become convinced that a default or distressed exchange is likely during the next 12 months; if the company's operating performance declines, resulting in a sharp decline in cash flow and liquidity; or if the company fails to make meaningful progress by late 2017 refinancing its 6% senior secured notes.

Although unlikely over the next 12 months, an upgrade would primarily depend on our favorable reassessment of the sustainability of Cenveo's financial commitments. This would likely entail a significant reduction in debt leverage, good operating performance, and stead discretionary cash flows generation.

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