Investing.com – Moody’s Ratings downgraded ’s corporate family rating to Caa1 from B3 on Thursday, citing expectations that ongoing operational challenges will limit the company’s ability to expand EBITDA and reduce debt/EBITDA below 7x by the end of fiscal 2027. The ratings agency also downgraded the company’s probability of default rating to Caa1-PD from B3-PD and lowered ratings on its backed senior secured first lien revolving credit facility, backed senior secured first lien term loan B and backed senior secured notes to Caa1 from B2. The speculative grade liquidity rating was downgraded to SGL-4 from SGL-3, with the outlook remaining negative.
The Toronto-based cloud-based software provider reported debt/EBITDA of 7.7x as of the 12 months ended March 31, 2026. Moody’s noted that high governance risk resulting from management turnover and shareholder activism have disrupted the continuity of strategy and execution, prolonging stabilization of results beyond initial expectations. The company derives more than 70% of revenue from the fragmented legal market and more than half of its revenue from transaction-based services.
Dye & Durham has C$105 million in senior secured revolving credit facility expiring in 2029, $350 million in first lien senior secured term loan B due 2031 and $555 million in senior secured notes due 2029, all rated Caa1. The company also has C$148 million in unrated convertible senior unsecured debentures due in 2028. Moody’s rated the revolver, term loan and notes Caa1, the same as the corporate family rating, noting that loss absorption is reduced following the repayment of C$185 million of convertible notes in March 2026.
The ratings agency assigned Dye & Durham weak liquidity through June 30, 2027, with sources approximating C$56 million against about $30 million of contingent consideration payments. Liquidity consists of C$36 million of cash as of March 31, 2026 and estimated free cash flow of about C$20 million through the next four quarters. Moody’s did not consider the company’s C$105 million revolving credit facility as a source of liquidity because access is restricted due to covenant compliance, with the company subject to a springing first lien net leverage covenant of 5.8x when utilization exceeds 35% and headroom at around 5% as of March 31, 2026.
Moody’s said the ratings could be upgraded if the company profitably increases scale and recurring revenue and generates consistent positive free cash flow while sustaining debt/EBITDA below 6.5x and EBITA/Interest above 1.5x. The ratings could be downgraded if the company does not address liquidity constraints in a timely manner, if there is a high likelihood of a debt restructuring, or if revenue and EBITDA declines do not reverse in a reasonable period.
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