News Column

S&P withdraws credit ratings for troubled Naples-based Allen Systems Group Inc.

June 10, 2014

By Jacob Carpenter, Naples Daily News, Fla.



June 10--Standard & Poor's has withdrawn all credit ratings for Naples-based Allen Systems Group Inc., the latest downgrade for the financially distressed technology company.

The credit rating agency withdrew Allen Systems Group's "D" grade after it missed an interest payment on its $300 million second-lien notes. The withdrawal of a credit rating reflects Allen Systems Group's major financial problems that have festered since 2012.

"The company is focused on taking the necessary steps to improve our long-term financial strength," said Ernest Scheidemann, Allen Systems Group's executive vice president and chief financial officer. He declined further comment.

The privately held Naples company reports about 1,200 employees and 55 offices in 21 countries. Its clients include some of the world's largest corporations, such as Coca-Cola, General Electric and Toyota, according to its Web site.

In 2012-13, Allen Systems Group reported annual revenues of about $284 million, according to credit rating agency Moody's.

As recently as April 2012, the company received an S&P corporate credit rating of "B," a relatively stable position. But Katarzyna Nolan, an S&P credit analyst, said the organization has struggled recently with several challenges: inability to compete with larger tech companies, poor transitioning to cloud computing services, slow integration of eight newly acquired companies and weak corporate management.

While a withdrawal of a credit rating often comes near the same time of a bankruptcy filing, Nolan said that's an unknown for Allen Systems Group.

"At this point, I'm not sure whether they'll file (for bankruptcy) or may be able to get more liquidity," Nolan said.

The company was founded in 1986 by Arthur L. Allen Jr., owner of a Port Royal property bought in 2007 for a record $40 million.

In December 2012, one month after missing an interest payment on the $300 million second-lien notes, the company received a $250 million secured loan from TPG Opportunities Partners. The loan resulted in an increased credit rating and a shake-up of Allen Systems Group's board of directors.

"They were making some positive decisions in terms of running the company, but apparently it wasn't enough so far," Nolan said.

Other credit analysis have also been pessimistic about Allen Systems Group.

Moody's downgraded the company's rating in August 2013 to "Caa2," one of its lowest possible scores. In its rationale, Moody's analysts wrote the company has suffered from "significant erosion in revenues as a result of sales execution missteps," among other issues.

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(c)2014 the Naples Daily News (Naples, Fla.)

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Source: Naples Daily News (FL)


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