S&P places Viavi on watch

S&P said it placed all its ratings for Viavi Solutions Inc., including the BB issuer rating, on CreditWatch with negative implications.

Viavi agreed to buy Spirent Communications for $1.3 billion in cash.

“We expect Viavi's debt to EBITDA to rise well above our downside trigger, and the pace of deleveraging is uncertain given the challenging industry conditions. Viavi's S&P Global Ratings-adjusted leverage is 4.5x as of Dec. 30, 2023, compared with our 4x downside trigger. The company's underperformance amid industrywide capital expenditure (capex) slowdown in network enablement combined with optical security products (OSP) softness pressured its earnings and cash flow, causing its S&P Global Ratings-adjusted leverage to rise meaningfully,” the agency said in a press release.

S&P warned the negative watch reflects the potential for a downgrade given the forecast for Viavi's leverage to rise above 6x initially post-acquisition and remain above 4x beyond 2025.

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