LSCS Holdings Inc. Ratings Downgraded To 'B-' On Integration Headwinds And Weak Cash Flow


  • LSCS Holdings Inc. (d/b/a EVERSANA) incurred significant acquisition integration headwinds that contributed to weaker cash flow and higher leverage than our expectations.
  • Based on our updated projections, we now expect leverage of 6x and only minimal free cash flow for 2019.
  • We lowered our issuer credit rating to 'B-' from 'B'. The outlook is stable.
  • We also lowered the issue-level ratings for the first-lien and second-lien credit facility to 'B-' and 'CCC', respectively. The recovery ratings are unchanged at '3' and '6' for the first-lien and second-lien debt, respectively.
  • The stable outlook reflects our expectation for minimal free cash flow generation in 2019. It also reflects our expectation for improved free cash flow generation in 2020 and beyond as the company continues to execute and grow revenues, improve the performance of Triplefin as well as certain one-off costs roll off.
NEW YORK (S&P Global Ratings) April 5, 2019--S&P Global Ratings today took the 
rating actions listed above. The downgrade reflects the company's significant 
free cash flow underperformance in 2018 caused by material integration and 
transaction costs. In addition, Triplefin (a HUB service company acquired in 
2018) was challenged in 2018, driven mostly by technology issues and 
non-optimal staffing levels for certain contracts. S&P Global Ratings-adjusted 
leverage was above 10x for 2018 compared with our previous expectation of 8x. 
Weak operating results, including some nonrecurring costs related to the 
acquisition, contributed to cash flow that was much lower than we expected.

The stable outlook reflects our expectation that the company will improve its 
overall businesses but that cash flow will remain minimal in 2019. It also 
reflects our expectation for improved free cash flow generation in 2020 and 
beyond due to revenue growth and the reduction of nonrecurring costs.
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