Moody’s Downgrades Outlook to Negative

Clover Imaging Group’s “parent” has been downgraded by one of the “big three” credit rating agencies.

Moody’s Investors Service—often referred to as Moody’s—has downgraded 4L Technologies’ (4L Tech) Corporate Family Rating (CFR) to B3 from B2, and its probability of Default Rating (PDR) to B3-PD from B2-PD.

According to Moody’s 4L Tech’s outlook was revised to “Negative” from “Stable.”

The report states, “The B3 CFR is constrained by 4L Tech’s elevated debt leverage of nearly 7x (Moody’s adjusted) as of June 30, 2017, especially in the context of the business risks related to the company’s limited end market focus on remanufacturing and repair services for imaging supplies, wireless devices, and telecom equipment.”

Moody’s adds, “4L Tech collects, remanufactures and distributes laser and inkjet printer cartridges, wireless devices, and telecom equipment through its network of approximately 70 global locations. The company’s main customers include leading office product retailers and wireless carriers in the United States. 4L Tech is majority owned by Golden Gate Private Equity, Inc. (Golden Gate).” Golden Gate Capital became the large equity partner of Clover in 2010.

4L Tech lists www.clovertech.com as it’s official website. The “Family Tree” (see below) describes 4L Tech as being the “parent” of Clover and seven other entities.

4L Tech also received positive ratings consideration by Moody’s based on its “leading market position as a provider of remanufactured printer cartridges as well as long-term relationships with key customers.” The report also notes the company has reduced costs through a rationalization of its labor force and the continued consolidation of the company’s manufacturing footprint. It is Moody’s impression profitability should improve and it recommended the sale of its telecom equipment business to boost debt repayments.

This week, founding CEO of Clover and 4L Tech in 1996, Jim Cerkleski announced he was stepping out that role. George Milton was appointed Chief Executive Officer of Clover Imaging and Cerkleski, became Chairman of the Board of Directors.

Clover declined to make any further comment to RT Media.