S&P downgrades System1

S&P said it lowered its ratings for System1 Inc. and financing subsidiary Orchid Merger Sub II LLC to SD, selective default, from CCC, and removed the ratings from CreditWatch, where it placed them with developing implications on Dec. 1. The agency also downgraded Orchid Merger Sub's senior secured term loan to D from CCC.

System1 bought back $63.1 million of its previously outstanding $365 million term loan at an average price of 64 cents on the dollar via a Dutch auction tender offer. Following the transaction, the company has $301.3 million outstanding on its term loan.

“We view the transaction as distressed because lenders received substantially less than originally promised, and we also viewed the company's capital structure as unsustainable and subject to default risk prior to the sale of its Total Security business and the subsequent debt repayment,” S&P said in a press release.

The agency added it plans to re-evaluate the ratings in the coming days.

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