Moody’s lowers Quest Identity

Moody's Investors Service said it downgraded Quest Identity Intermediate Ltd.'s corporate family rating to Caa1 from B3 and probability of default rating to Caa1-PD from B3-PD. Concurrently, the agency trimmed Quest subsidiary OID-OL Holdings, Inc.'s backed senior secured first-lien bank credit facilities to B3 from B2, and the rating for its backed senior secured second-lien term loan to Caa3 from Caa2. The outlook was changed to stable from negative for both issuers.

“The downgrade reflects Quest's very high financial leverage of mid 9x as of the LTM period ended October 2023, weaker than expected operating performance, and Moody's expectation of negative free cash flow generation over the next 12 months. Quest's interest expense continues to be a major drag on its cash flow from operations in the high-interest rate environment and Moody's expects Quest to continue to rely on its revolving credit facility to fund cash flow deficits at least over the next 12 months,” the agency said in a press release.

As of Quest’s fiscal third ended October 2023, $220 million was outstanding under Quest's $400 million revolving credit facility.

“The stable outlook reflects Moody's expectation that Quest's revenues will grow in the low single-digit percentage range over the next 12 months and adjusted EBITDA margins will improve driven by cost saving and restructuring initiatives,” the agency said.

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