Dye & Durham Ltd.’s lenders have retained Houlihan Lokey Inc. as financial adviser as the software company’s capital position comes under increased scrutiny, according to people familiar with the matter.
The creditors held pitches from financial advisers over the past weeks before selecting Houlihan Lokey, the people said, who asked not to be named because the discussions were private.
The group is also being advised by Paul Hastings and has entered into a cooperation agreement that is not currently admitting additional holders, the people said. Silver Point Capital LP and KKR & Co. are among members of the cooperation group, the people said.
So far, first-lien lenders are holding discussions on how to engage with the company rather than on potential financing proposals, according to the people.
A separate minority lender group may also emerge and is expected to be led by law firm Hogan Lovells Cadwalader, according to the people.
Dye & Durham, Paul Hastings, Hogan Lovells Cadwalader and Silver Point did not immediately respond to requests for comment. Representatives for Houlihan Lokey and KKR declined to comment.
Last month, S&P Global Ratings downgraded Dye & Durham’s credit rating to CCC+ from B-, saying the company was carrying too much debt and that it was not sustainable over the long term. The agency said the company’s debt was about 9.5 times its earnings before interest, taxes, depreciation and amortization (EBITDA), while its earnings covered interest payments by only about one time.
S&P also warned that if the company’s operating performance weakens further, it may need to renegotiate the financial conditions, known as debt covenants, in its loan agreements or seek temporary waivers from lenders. The agency said Dye & Durham is increasingly relying on much stronger earnings next year or proceeds from selling assets to reduce its debt.
The ratings firm kept a negative outlook, meaning it believes the company’s credit profile could worsen. The rating could be lowered again if the company runs short of cash or restructures it debt in a way that creditors view as distressed, S&P said.