OREANDA-NEWS. S&P Global Ratings said today that it raised its issue-level rating on Omaha, Neb.-based Infogroup Inc.'s senior secured debt to 'B' from 'B-' and revised the recovery rating to '2' from '3'. The '2' recovery rating indicates our expectation for substantial (70%-90%; lower half of the range) recovery of principal in the event of a payment default.

At the same time, we affirmed our 'B-' corporate credit rating on the company. The rating outlook remains stable.

"The 'B-' corporate rating on Infogroup reflects the company's smaller scale and exposure to cyclical marketing spending, the secular pressure on its traditional marketing services, and our expectation for modest cash flow deficits in 2016--mainly due to the nonrecurring legacy tax penalty payment (roughly $20 million in 2016)," said S&P Global Ratings credit analyst Heidi Zhang.

The stable rating outlook reflects our expectation that Infogroup will have continued revenue and EBITDA growth, modest discretionary cash flow deficits (including one-time legacy tax penalty payments) in 2016, and an at least 10% margin of compliance with its maintenance financial covenants.

We could raise our corporate credit rating on Infogroup if the company reduces leverage to below 5x on a sustained basis, if it generates more than $10 million of discretionary cash flow through EBITDA growth, and if we believe there will be adequate liquidity over the next 12 months.

We could lower the rating if competitive pressure and customer attrition cause the company's covenant headroom to decline to less than 10% or discretionary cash flow to deteriorate from our modest discretionary cash flow deficit projection for 2016.