symplr Software, Grocery Outlet trend lower with general market heaviness

By Sara Rosenberg

New York, Sept. 14 – symplr Software Inc. had the outlook on its rating revised downwards and Grocery Outlet Inc. (GOBP Holdings Inc.) saw its ratings upgraded, but both of these names traded lower on Wednesday as the market in general retreated.

One market source had the general market lower by about a quarter to a half a point on the day. Another source said it was weaker by about a quarter of a point on Wednesday, which was slightly better than the half a point it lost in the previous session.

symplr softens

symplr Software’s covenant-lite first-lien term loan due December 2027 dipped to 96¾ bid, 97¾ offered from 97 bid, 98 offered as the outlook on the company’s ratings was revised to negative from stable by Standard & Poor’s, according to a market source.

However, the secondary market in general was down, so symplr likely moved with the general market as opposed to on the ratings news, the source added.

S&P said that the negative outlook on symplr reflects its view that if EBITDA remains suppressed in the second half of 2022 with limited prospects for improvement in 2023, financial metrics may no longer be commensurate with a B- rating.

The move also reflects S&P’s view that ongoing investments to support organic revenue growth, combined with the higher interest rate environment, could lead the company to sustain free operating cash flow deficits.

The rating agency believes there is significant execution risk to drive profitability and any operational misstep or unforeseen industry downturn could result in constrained liquidity. Although S&P anticipates the company will maintain sufficient liquidity during the next 12 months, further cash burn and a greater reliance on the revolving credit facility than expected could lead to an assessment of symplr’s capital structure being unsustainable.

symplr is a Houston-based provider of health care governance, risk and compliance software solutions. Midas is a provider of clinical and analytics transformation software solutions.

Grocery moves with market

Grocery Outlet’s term loan B was quoted at 98 3/8 bid, 99 1/8 offered on Wednesday, down from 98½ bid on Tuesday, a trader remarked.

Since Monday, the term loan B is down a total of about half a point, so the debt basically followed the general market and did not react to news of a ratings upgrade, the trader added.

S&P lifted Grocery Outlet’s term loan to BB+ from BB- and issuer credit rating to BB- from B+ as the company recently reported strong and better-than-projected performance through the second quarter of 2022, including 11% growth in comparable sales, and repaid $75 million of its first-lien term loan with cash on hand.

The ratings have a stable outlook to reflect S&P’s expectation that the company will sustain good operating performance trends along with S&P-adjusted leverage tracking in the 3x to 4x range over the next year.

Grocery Outlet is an Emeryville, Calif.-based grocery store operator.

Loan indices

In other news, IHS Markit’s iBoxx loan indices declined on Tuesday, with the Leveraged Loan indices (MiLLi) closing out the day down 0.1% and the Liquid Leveraged Loan indices (LLLi) closing out the day down 0.18%.

Month to date, the MiLLi is down 0.04% and year to date its down 1.5%. The LLLi is down 0.26% month to date and down 2.67% year to date.

Average secondary market bids in the U.S. on Tuesday were 93.81, down 3.14% year to date.

According to the IHS Markit data, some of the top advancers on Tuesday were Quorum’s July 2020 term loan at 67.5, up from 66.5, Audio Visual Services February 2018 second-lien covenant-lite term loan at 82.17, up from 81, and Trademen/Tribe Buyer’s February 2017 term loan at 82.33, up from 81.18.

Some top decliners on Tuesday were Wheel Pros May 2021 covenant-lite term loan at 73.67, down from 83.29, Rodan & Fields’ June 2018 covenant-lite term loan B at 50.4, down from 53.73, and Cineworld’s February 2018 U.S. covenant-lite term loan at 45.94, down from 48.52.

Fund flows

Tuesday’s actively managed loan fund flows were negative $96 million and Loan ETFs were negative $41 million, sources said.

Actively managed high-yield fund flows were positive $125 million on Tuesday and high-yield ETFs were negative $575 million, sources added.

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