S&P boosts System1

S&P said it raised its ratings for System1 Inc. and its financing unit Orchid Merger Sub II LLC to CCC+ from SD, selective default.

“The CCC+ rating reflects our belief that System1 remains dependent on favorable economic and operating conditions over the longer term to meet its financial obligations despite recent debt reduction and improved liquidity. We expect the company's S&P Global Ratings'-adjusted gross leverage to be about 7.6x with an approximate $5 million FOCF deficit in 2024.

“Despite this, following the sale of its Total Security business and the subsequent debt repurchases, we estimate the company has around $90 million to $100 million of cash on the balance sheet and full availability under its $50 million revolving credit facility,” S&P said in a press release.

However, the agency noted the company’s term loan continues to trade at a steep discount to par at about 65 cents on the dollar heightening the potential for distressed exchange.

The outlook is stable.

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