Cvent Inc. Downgraded To 'CCC+' On Macroeconomic Weakness From Coronavirus Fallout; Outlook Developing

  • S&P Global Ratings expects that social distancing measures adopted in the U.S. to slow the spread of the new coronavirus will significantly lower demand during the course of the public health crisis for the event and conference management software solutions that Tysons Corner, Va.-based Cvent Inc. provides to corporations, nonprofit organizations, and providers of hospitality services.
  • We are lowering our issuer credit rating on the company to 'CCC+' from 'B-'. The outlook is developing.
  • We are also lowering our issue-level rating on the company's secured term loan to 'CCC+' from 'B-'; the recovery rating remains '3'.
  • The developing outlook reflects our view that we could raise the rating if the coronavirus pandemic is contained by mid-2020 allowing bookings to return to pre-crisis levels in the second half, or we could lower the rating if the crisis extends into the second half of 2020 and the company misses the chance to capitalize on seasonal bookings in the second half, setting up another weak year in 2021.
NEW YORK (S&P Global Ratings) March 26, 2020—S&P Global Ratings today took the rating actions listed above. The downgrade reflects our view that social distancing measures adopted in the U.S. to slow the spread of the new coronavirus will significantly lower demand for event- and conference-management software solutions during the course of the crisis. Cvent has delivered strong double-digit growth for several years and we believe it has a durable market position, but the nature of its business as an events-technology provider make it particularly vulnerable in this crisis. We believe that after the crisis passes, Cvent will remain a leading provider and will likely benefit from the release of pent-up demand. In addition, we believe the company has the liquidity to be able to survive until the next seasonally strong booking period in the second half of 2020, which should set up a strong 2021 if the season is good. However, to affirm the 'B-' rating in the face of expected negative free cash flow, we would have to have be more certain about the forecast and the timing of the recovery. In addition, the company may need to grant concessions to customers to preserve business relationships, although concessions may come with favorable contract extensions.
The developing outlook reflects our view that upside and downside cases are roughly equally plausible. It also reflects the company's good market position, strong track record of revenue growth, and liquidity that we believe can provide support through a downturn that peaks in the second quarter, but also seasonal bookings and cash flow patterns, and uncertainty about the depth and duration of the coming recession.
We could raise the rating if the spread of coronavirus is contained by mid-2020 allowing bookings to return to pre-crisis levels in the second half, which will support a strong rebound in 2021 such that unadjusted free operating cash flow returns to near breakeven, and we believe that the risk that the virus will return in additional waves is low.
We could lower the rating if the crisis extends into the second half and bookings remain constrained at very low levels, potentially leading to a weak year in 2021. We could also lower the rating if total liquidity falls below $60 million, which incorporates cash needed to run the business and a cushion in case covenants compel the repayment of part of the revolving credit facility.
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