Highlights

1/28/2019: Moody's  downgrades Company debt to Caa2. https://bit.ly/2WxNysP

PGi has proposed amendments to its existing credit agreements to waive the total leverage covenant for 2Q 2019 and a potential going concern qualification requirement in its 2018 financial statements. As part of the amendment, the company's sponsors will commit to a new $20 million equity contribution, which follows the $30 million equity infusion in the second half of 2018. The company also expects to complete the sale of certain non-core assets in the near term, which management believes, along with the equity support, will provide the company adequate liquidity through 2019 to execute on its plans to commercially offer a new UCaaS offering. The continuing support from financial sponsors' is credit positive. However, Moody's believes that the proposed amendment and equity infusion will only improve PGi's liquidity on a short-term basis.

10/8/2018: Moody's downgrades Company debt to Caa1 https://bit.ly/2JY3FhU

On October 3, 2018, PGi reported that it received a $25 million equity contribution to shore up its liquidity and appointed a new CEO. The company is also in the process of selling a non-core asset. Despite the capital contribution, the downgrade reflects Moody's expectation for weak liquidity over the next 12 months, including limited, if any, cushion under the leverage covenant, limited availability under its revolving line of credit, and weak free cash flow that will be insufficient to fund mandatory term loan payments and earn-outs over the next 12 months. Absent the planned asset divestiture or an amendment of the revolver, there is a material risk of breaching the leverage covenant. Moody's believes that the divestiture will only temporarily alleviate PGi's liquidity position. PGi's revenues from its legacy audio conferencing services are expected to continue to decline. The company's strategy of offsetting the revenue declines with growth from Unified Communications (UC) products has high execution risk. The scheduled maturity of PGi's revolving credit facility in December 2020 limits the available time to demonstrate the commercial success of the new products. Since its leveraged buyout PGi has executed on significant cost reductions that have mitigated the impact of declining revenues. But sustained revenue declines and a limited track record of sales from new products increases uncertainty in estimating cash flow over the next 12 to 18 months.