Standard & Poor’s lowered its ratings on MDC Partners from B+ to B, with the ratings service saying it expects the holding company’s debt level to remain high over the next 12 to 18 months.
According to S&P, a B rating indicates a company is “more vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.”
In making the change, the ratings agency gave the company a stable outlook, with S&P saying it expects MDC will generate positive discretionary cash flow in the second half of the year and that debt will begin to fall as earnings (EBITDA) grow and the company reduces spending to attract "top-tier talent."
Characterizing the company’s financial risk profile as “highly leveraged,” S&P analyst Michael Altberg said that “elevated financial risk (at MDC), together with continued economic uncertainty and our ‘fair’ assessment of the company’s business risk profile is inconsistent with a ‘B+’ rating, [in] our view”.
In July, MDC reported a second-quarter loss of $20.1 million compared to profit of $1.3 million in the year-ago quarter. Revenue in the period increased 15.2 percent to $274.1 million from $238 million in 2011.