Near term debt maturities and high interest cost may force Cenveo for debt restructuring to avoid bankruptcy.

Cenveo Inc. (NYSE: CVO) is a Stamford, US based diversified manufacturer of print related products like envelope converting, commercial printing, and labels.  As of 31 December 2015, the company operated three reportable segments: envelope, print and label.

Total debt stood at USD 1.21bn at the end of 2015, out of which USD 427m matures in the next 12 to18 months. Thus in order to reduce rising debt burden, on 19 January 2016 the company sold its sole profit making Packaging Business to ‘WestRock Converting’ for USD 105m. The Net proceeds received from the sale were used to repay debt, as a result pro-forma total debt decreased to USD 1.1bn. Furthermore company’s total liquidity amounted to USD 132.1m, including USD 7.79m cash and USD 124.3m availability under its revolver, which is not enough to meet its near term debt (bond and ABL revolver) maturities. As of 2015, Company was in compliance with minimum fixed charge coverage ratio of 1.0x in relations to its covenants of its credit agreement. Given the above situation, on February 2016 Moody’s investors service downgrade Cenveo’s corporate family rating and probability default rating to caa2 from caa1 and caa2-PD from caa1-PD, respectively.


In regards to its ABL Facility, the company may elect to extend the maturity date of the ABL Facility to April 2018 if prior to 14 January 2017, the company has  purchased, redeemed, defeased or otherwise refinanced the 11.5% Notes, such that no more than USD 10m remaining outstanding.

graphFor FY15, Cenveo’s revenue decreased by USD 19.5m (1.1% down on YoY) to USD 1.74bn in 2015 due to lower sales from its envelope and label segment. The company has guided 2016 sales close to USD 1.7bn.  However adj. EBITDA improved 13.3% YoY to USD 158m in FY15 driven by cost reduction initiatives. Going forward for FY16 the company anticipates adj. EBITDA in the range of USD 155m to USD 160m, which would imply an adj. EBITDA margin of approximately 9.4%. On the basis of this guidance, net leverage could be in the range of 6.5x to 7.0x for 2016.


The above improvement in adj. EBITDA coupled with reduction in CAPEX spend and lower interest expense reduced FCF cash burn to negative USD 95m in FY15 from negative USD 115m in FY14. For 2015 aforementioned CAPEX and Interest expenses reduced 19.8% YoY and 6% YoY respectively. Moreover interest expense reduced on account of prior mentioned debt repayment.

NYSE compliance:

  • On 19 January 2016, a notice received from NYSE required Cenveo to maintain a average closing price of its common stock to be at least USD 1.00 per share for 30 consecutive days. The company had 180 days from the date of the notice to regain compliance.
  • Following this on 11 February 2016, Cenveo received a follow-on notice from NYSE, as the company had failed to maintain a minimum market capitalization of USD 50m for 30 consecutive trading days. The company had 180 days from the date of the notice to regain compliance.

Going forward, in absence of any further asset disposal, comings months look challenging as high interest payments are likely to run quickly through the company’s razor thin liquidity position.



Categories: North American Earnings

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