Fitch downgrades Finastra

Fitch Ratings said it downgraded Finastra Ltd.’s and related entities’ long-term issuer default rating to B- from B. The agency also lowered the company's senior secured first-lien revolver and term loan to B+/RR2 versus prior BB-/RR2 and second-lien term loan to CCC/RR6 from CCC+/RR6. The outlook is negative.

“Fitch's ratings and outlook reflect Finastra's high leverage and lack of sustained positive FCF generation. The ratings also reflect its market position as a fintech software vendor to many leading banks globally, revenue growth that Fitch expects could be in the low-single-digit range in the coming years, and high EBITDA margins,” the agency said in a press release.

“Fitch expects results may continue to be choppy in the coming quarters due to weaker upfront sales (customers shifting to recurring, software as a service/SaaS, model plus likely some deal pushouts) and macro uncertainty causing some customers to pause spending. Fitch believes the company may also be ceding some share in certain areas of its business,” the agency added.

Fitch said it estimated Finastra’s gross debt/EBITDA at February was 8.6x and will likely remain high in the 8x-9x range or higher through FY 2024.

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