Aptos (Cayman) LP Downgraded To #B-# On Revenue Pressure And Declining Outlook Stable

Stocks and Financial Services Press Releases Thursday June 29, 2017 09:27
NEW YORK--29 Jun--S&P Global Ratings

NEW YORK (S&P Global Ratings) June 28, 2017--S&P Global Ratings today loweredits corporate credit rating on Atlanta-based Aptos (Cayman) LP to 'B-' from'B'. The outlook is stable. At the same time, we lowered our issue-levelrating on the company's $225 million first-lien term loan to 'B-' from 'B'.

The recovery rating remains '3', indicating our expectation for meaningful(50%-70%; rounded estimate: 55%) recovery for lenders in the event of apayment default.

The 'B-' corporate credit rating reflects our view of Aptos's adjustedleverage near the low 7x area, pro forma for the BTE acquisition completed inSeptember 2016. We further expect that leverage will remain near the 7x areathrough fiscal 2017 in contrast to our prior expectation for the low-5x area.

The integration of BTE, an exclusive reseller of Aptos's products in the U.K.,is mostly complete, but this business has underperformed our expectations dueto foreign currency pressures resulting from Brexit and increasedconcentration in BTE's lower-margin hardware businesses. On a consolidated

basis, Aptos has experienced significant margin contraction due to theintegration of the lower-margin BTE business and a substantially higher mix oflower-margin hardware equipment revenue. Although we acknowledge retailconditions are increasingly challenging, Aptos's ability to provide software

facilitating the transition to omni-channel retailing should lead to modestrevenue growth over the next 12 months.
The stable outlook reflects our expectation that Aptos will achieve modesttop-line and EBITDA growth over the next 12 months, while maintaining positivefree cash flow generation and adequate liquidity.

We could lower the rating on Aptos if disruptions to the business or macropressures lead to declines in customer renewal rates, such that the companyexperiences revenue declines and/or generates negative free operating cashflow on a sustained basis, maintains inadequate liquidity, or if we deem thecapital structure unsustainable over the long term.

Although unlikely over the next 12 months, we could raise the rating on Aptosif the company is able to realize modest synergies and achievemid-single-digit organic revenue growth leading to margin expansion. Thiswould have to be coupled with sustaining adjusted leverage below 6x inconjunction with free operating cash flow as a percentage of debt in themid-single-digit area.


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