Moody’s cuts R.R. Donnelley, loan, notes

Moody's Investors Service said it downgraded R.R. Donnelley & Sons Co.’s ratings to Ba3 from Ba2 and changed the outlook to developing.

As part of the same action, the agency downgraded R.R. Donnelley's senior secured bank credit facility to Baa3 from Baa2 and senior unsecured notes to B1 from Ba3 and affirmed the SGL-3 speculative grade liquidity rating (indicating good liquidity).

Moody’s said the downgrade was prompted by its anticipation that R.R. Donnelley's future pace of de-levering will continue to slow as top-line and margin pressures persist. The proportion of R.R. Donnelley's EBITDA that is converted into free cash flow has been declining and free cash flow as a proportion of outstanding debt has been gradually decreasing, and Moody's expects both trends to continue, even after the company absorbs what appears to be a one-time appreciation of the U.S. dollar.

The agency expects revenue and EBITDA to be flat to modestly negative because of the print industry's continuing secular decline, permanently impairing the company's de-levering capabilities.

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