Rating Downgrade Overview

S&P Global Ratings downgraded Dye & Durham Corp. (TSX:DND) to a CCC+ sovereign‑issue rating from B‑ on 13 June 2026 and attached a negative outlook. The agency also lowered the issue‑level rating on the company’s secured debt to CCC+ and assigned a recovery rating of 3, implying an expected average recovery of 50‑70% in a default scenario.

Leverage and Coverage Deterioration

The rating agency reported that adjusted leverage increased to 9.5 times in the third quarter ending March 2026, up from 8.3 times in fiscal 2025 and well above its prior projection of 7 times. S&P now forecasts that Dye & Durham will finish fiscal 2026 with leverage between 9.5 times and 10 times and anticipates a free operating cash‑flow deficit for the year. Last‑12‑months EBITDA interest coverage declined to 1.0 times in March, down from 1.4 times in fiscal 2025.

Liquidity Position

The company’s cash balance fell to $35.6 million in the third quarter of 2026, compared with $57.6 million at the end of the first quarter. Revolver borrowing stood at $31.5 million at quarter‑end, leaving only $5 million of headroom before the 35 % utilization trigger would be breached, which would require compliance with a first‑lien covenant of 5.8 times.

Revenue Decline and Business Mix

Revenue for the first three quarters, excluding the Credas sale completed in January 2026, declined by $27.8 million, a 9 % drop. Higher‑than‑expected churn after contract renewals in the second half of 2025, together with lower minimum‑spending commitments and reduced transaction volumes, constrained revenue. Non‑contracted transactional revenues, representing roughly 45 % of total revenue, remain vulnerable to continued softness in Canada and the United Kingdom.

Forward‑Looking Statements

S&P Global indicated that Dye & Durham is increasingly dependent on stronger earnings and cash flow in 2027 or on proceeds from asset sales to reduce its debt burden. The agency warned that a near‑term default scenario—such as a liquidity shortfall or a distressed debt exchange—could trigger an additional downgrade within the next twelve months if real‑estate transaction volumes remain reduced, customer churn stays elevated, or restructuring costs exceed expectations.