The Upgrade: Episode 29: Cash Flow Drought, Refinancing Wall Heighten Rating Risks In Business And Technology Services

In episode 29, Nishit Madlani, the U.S. sector lead for business services and autos at S&P Global Ratings and Ben Hirsch, an associate director within the S&P’s U.S. business services team, discuss their latest article titled: Cash Flow Drought, Refinancing Wall Heighten Rating Risks In Business And Technology Services; But Some Sectors Are An Oasis.

Key takeaways from the article include:

Looming refinancing risks and weaker cash flow prospects amid tight credit conditions will weigh on the business and technology services sector through 2025. About 57% of U.S. issuers are projected to generate weaker free operating cash flow (FOCF) in 2023 due to higher interest costs, potentially complicating refinancing efforts. With a large majority of the sector coverage rated 'B' or below, we expect an increase in downgrades to the 'CCC' category as distressed exchanges and payment default scenarios intensify. Distributors, facilities maintenance providers, and software and information services providers are most vulnerable to downside risks, while providers of education and publishing services, security and safety services, and payment and insurance services remain relatively resilient.

 

Links to articles discussed in the podcast:

Cash Flow Drought, Refinancing Wall Heighten Rating Risks In Business And Technology Services; But Some Sectors Are An Oasis: https://www.spglobal.com/ratings/en/research/articles/230627-cash-flow-drought-refinancing-wall-heighten-rating-risks-in-business-and-technology-services-but-some-sector-12768327

What Rising Interest Rates Could Mean For U.S. Business And Technology Services Companies Rated 'B' And 'B-': https://www.spglobal.com/ratings/en/research/articles/230118-what-rising-interest-rates-could-mean-for-u-s-business-and-technology-services-companies-rated-b-and-b-12613219