Rating agency Fitch has downgraded Atento’s rating even further as the company finds itself amids a debt restructuring process.
Fitch moved Atento’s credit rating from ‘CC’ to ‘RD’ (Restricted Default), the second-to-lowest rating in the agency’s scale, only above the ‘D’ (Default) rating.
RD ratings are reserved for companies which find themselves under exceptional financial stress or which have failed to meet payments without actually initiating bankruptcy filings.
“The rating actions follow the company’s [Atento´s] missed interest payment due on August 10, 2023 on its senior secured notes as part of the company’s proposed restructuring plan,” Fitch explained in its commentary on the downgrade.
Atento (one of the largest BPO providers in Latin America and a major player in the Brazilian CX space) has been dealing with exceptional financial stress for several years. Its woes culminated earlier in 2023 with a precipitous fall in its market capitalization, which triggered a delisting process from the New York Stock Exchange.
Though company stock isn’t being traded publicly anymore, it’s still available for over-the-counter trading.
Heavy (Financial) Burden
The company is months-deep into a financial restructuring process started in June 2023. In early October, days before Fitch’s most recent ratings action, Atento informed that it had received US$76 million in “backstop commitments,” bringing the funds acquired by the company to US$113 million.
Atento stated that the funding and restructuring process will “strengthen the Company’s financial position and ensure a stable platform for future growth”.
Fitch mentioned in its commentary that the company expects its net leverage to go below 1.0x once the restructuring is over. The process is expected to end on November 2023.
The latest net leverage number reported by the company (Q3 2022) was 6.1x. Between the end of 2016 and Q3 2022, its total debt climbed from US$543.9 million to US$715.6 million.
Its own financial woes are but one of the troubles faced by Atento. The ratings agency warned that remote working trends could hurt Atento’s future prospects, saying work-from-home policies are pushing down CX service prices.
“More employees working from home has resulted in cost savings for operators but also in workstation overcapacity, which has led to increased price competition,” Fitch noted. “Spare capacity is estimated at 20%-25%, and Brazilian and Spanish markets in particular are seeing fierce competition,”
Fitch expects to release another ratings action once Atento is done with its restructuring process.