S&P Warns of High Risk Levels at Cygnus
Staff -- Tradeshow Week, 1/16/2006
A credit ratings agency has warned that levels of financial risk are exceedingly high at Cygnus Business Media.
Standard & Poor's Ratings Services placed Cygnus' CCC+ corporate credit rating, CCC+ first-lien bank loan rating and CCC- second-lien bank loan rating on credit watch with negative implications.
The ratings agency said the Westport, Conn.-based company is in danger of violating its bank covenants. Cygnus and parent CommerceConnect Media Holdings had $200 million in consolidated debt and $45 million in preferred stock as of the end of the third quarter.
"Cygnus' financial risk is very high, because operating company borrowings to make holding company debt repayments are jeopardizing operating company covenant compliance," said S&P credit analyst Tulip Lim.
The company's compliance cushion is expected to tighten each quarter this year, the agency warned, adding that Cygnus has "nominal cash balances" and $15.4 million in company debt maturing this month.
CommerceConnect CEO Paul Mackler and Boston private-equity firm ABRY Partners formed Cygnus in 2000. The business-to-business media company operates 68 Web sites, 67 trade publications, 53 expositions and 11 directories in 15 different markets.
The agency further warned that cash flow is unlikely to help ease the financial pressure from its covenants and debt maturities. "These factors make the company vulnerable to a near-term default, and Cygnus' failure to proactively address these risks suggests an inappropriately high tolerance for risk," Lim stated.
Cygnus has high debt levels, a small operating cash flow base and difficult business fundamentals, according to the agency. On the plus side, S&P noted that the company has diverse cash flow and competitive positions in its markets.
