Moody's Assigns B3 Corporate Family Rating to Convergint Technologies Group Holdings LLC

Strategic Insights -

Moody's Ratings has assigned a corporate family rating (CFR) of B3 and a probability of default rating (PDR) of B3-PD to Convergint Technologies Group Holdings LLC (Convergint), a service-based organization that designs, installs, and maintains building systems. The company's credit profile is constrained by high pro forma financial leverage, modest profitability, and corporate governance risks related to its concentrated equity ownership.

Key Takeaways:

  • Convergint's corporate family rating (CFR) is B3, with a probability of default rating (PDR) of B3-PD.
  • The company's credit profile is constrained by high pro forma financial leverage, with a debt-to-EBITDA ratio of approximately 8.5x as of March 31, 2025.
  • Convergint's high leverage is driven by the debt-funded repayment of its existing preferred equity, which has increased its LTM debt-to-EBITDA by 1.2x.
  • The company's credit profile is also negatively impacted by modest profitability and corporate governance risks related to its concentrated equity ownership.
  • Moody's expects Convergint to realize high single-digit organic annual revenue growth over the next 12 to 18 months, modest expansion in EBITDA margins, and a contraction in debt-to-EBITDA towards 8x by the end of 2025.
  • The company's liquidity profile is adequate, supported by a pro forma cash balance of approximately $86 million following completion of the refinancing transaction, as well as free cash flow-to-debt approximating 1% over the next 12-15 months.
  • Convergint's ratings are stable, with a positive outlook reflecting Moody's expectations for the company to reduce financial leverage and maintain its tangible growth prospects in the commercial security systems services market.
  • The ratings may be upgraded if Convergint achieves ongoing strong revenue gains, margin expansion, and significant, sustained deleveraging below 6x.
  • The ratings could be downgraded if the company adopts more aggressive financial strategies or experiences a material deceleration in revenue and EBITDA growth, leading to an increase in debt-to-EBITDA leverage and free cash flow deficits.

Statistics:

  • Convergint's corporate family rating (CFR) is B3, with a probability of default rating (PDR) of B3-PD.
  • The company's debt-to-EBITDA ratio is approximately 8.5x as of March 31, 2025.
  • The company's liquidity profile is supported by a pro forma cash balance of approximately $86 million following completion of the refinancing transaction.
  • Convergint's free cash flow-to-debt approximates 1% over the next 12-15 months.
  • The company's revenues are expected to approximate $3.1 billion in 2025, pro forma for recently completed and pending acquisitions.

Sources:

  • Moody's Ratings
  • Convergint Technologies Group Holdings LLC
  • Ares Management Corporation (Ares)
  • Leonard Green & Partners, L.P. (LGP)
  • Harvest Partners, LP (Harvest)