Moody's downgrades TCS

Moody's Investors Service said it downgraded Technicolor Creative Studios SA's senior secured ratings of its €623 million equivalent (split into €564.2 million and $60 million tranches) senior secured first-lien term loan to Caa1 from B2 and €40 million senior secured multicurrency revolving credit facility to B1 from Ba2.

The agency also lowered the corporate family rating to Caa1 from B2 and its probability of default rating to Caa1-PD from B2-PD. The outlook has been changed to negative from stable.

The rating action follows TCS' Nov. 15, profit warning announcement. The company slashed its profit guidance for EBITDA after leases (as defined by the company) to €45 million-€65 million at budget foreign-exchange rates (or €50 million-€70 million at actual foreign-exchange rates) from the previous €120 million-€130 million for 2022.

“The guidance revision was prompted by staff-related issues such as high attrition rates and low labor efficiencies, while the company indicated the market demand for visual effects services (VFX) remained robust, including stronger than expected demand in its advertising segment,” Moody’s said in a press release.

Moody’s said it projects TCS’ leverage for 2022-2023 will be 8x-8.5x versus the previously expected 4.5x-5x.

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