S&P puts System1 on developing watch

S&P said it placed its ratings, including the CCC issuer rating, for System1 Inc. and its financing subsidiary Orchid Merger Sub II LLC on CreditWatch with developing implications.

System1 announced it sold its subscription-based cyber security products business Total Security Ltd. to Just Develop It Ltd. (JDI), a former shareholder of System1, for consideration valued at $340 million consisting of cash, stock and the assumption and waiver of potential earnout liabilities owed to Total Security. The company said it plans to use a portion of the proceeds to reduce debt, although it has not announced details.

“While this could improve System1's liquidity and credit measures, we could potentially view any debt repayment as distressed if we believe investors will receive less value than originally promised,” S&P said in a press release.

The agency said it aims to resolve the CreditWatch after assessing the details of any debt reduction along with the effect on System1's liquidity, credit measures and business prospects.

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