Diebold Nixdorf Inc Outlook Revised To Negative On Macroeconomic Uncertainties

  • On March 19, 2020, Diebold Nixdorf Inc. announced that it drew its full availability under its $412.5 million revolving credit facility to increase its cash position out of an abundance of caution in light of the evolving COVID-19 pandemic.
  • While the bolstered liquidity position will likely enable Diebold to withstand the short-term demand and supply constraints and operational disruption due to COVID-19, we believe the uncertain macro environment could significantly pressure hardware sales in 2020. In addition, a slower than expected recovery could delay certain DN Now initiatives, leading to elevated leverage and threatening the company's ability to refinance maturities in 2021 and beyond.
  • We are affirming all of our ratings on Diebold including our 'B-' issuer credit rating and revising our outlook to negative from stable.
  • The negative outlook reflects our view that the uncertain macro environment could materially affect operational performance over the next 12 months and delay cost improvement initiatives and deleveraging. Significant underperformance would lead to elevated leverage levels, threatening the company's ability to refinance debt due in 2022.
NEW YORK (S&P Global Ratings) March 25, 2020—S&P Global Ratings today took the rating actions listed above. Weaker global growth and disruption due to the coronavirus pandemic will likely affect operational performance materially in 2020.
The negative outlook reflects our view that the uncertain macro environment could materially affect operational performance over the next 12 months and delay cost improvement initiatives and deleveraging. Significant underperformance in hardware order activity and software and services sales would lead to elevated leverage levels, threatening the company's ability to refinance debt due in 2022.
We could lower the rating if liquidity deteriorates significantly or the potential for a covenant breach increases over the next 12 months. We could also lower the rating if we believe weakening business fundamentals that delay the company's deleveraging may not be conducive to a debt refinancing.
We could revise our outlook back to stable if we believe improving macroeconomic and business fundamentals would be supportive of debt refinancing. An expectation of good covenant headroom, stability of end market demand for Diebold's products, and further traction on the company's multi-year business improvement plan would also support a stable outlook.
We could raise our rating if the company achieves and sustains its identified cost savings and operational improvements such that leverage diminishes to below 6.5x on a sustained basis with reported FOCF to debt above 5%.
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