Moody’s Investors Service has downgraded Open RAN OEM Mavenir Systems, Inc., following the company’s new $95 million loan to pre-fund anticipated cash burn due to significant R&D spend. Moody’s is projecting higher working capital needs, and a softer top-line growth forecast for the company. Mavenir’s rating went to B3 from B2.
The issuance of debt is a “significant break” from Mavenir’s past where it covered its capital needs using private equity and other strategic investors, according to Moody’s. “Partial usage of debt capital for alternate sources of liquidity to fund deficits increases leverage and cash borrowing costs and could create an unsustainable capital structure over time,” the credit rating firm wrote in a rating note. Additionally, it said that Mavenir’s key credit metrics have been weak for a sustained period.
However, Moody’s described Mavenir’s revenue growth as strong. It has relationships of 12 years on average with more than 325 customers, including 17 of the top 20 carriers. “[Mavenir has] good geographic diversity, a large target addressable market with strong demand drivers,” Moody’s wrote. “The company’s strong niche position in leading technology software and services, and strong engineering talent and patent portfolio also support the credit profile.”
Moody’s expects Mavenir to maintain adequate liquidity over the next 12 months, and it expects that negative free cash flows over the next year will be driven by high R&D spending supported by cash balances, availability on a currently undrawn revolving credit facility and a mix of debt raises and equity support from the financial sponsors.
By J. Sharpe Smith, Inside Towers Technology Editor
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