CPI Card Group’s senior secured notes downgraded by Moody’s

Investing.com -- Moody’s Ratings has downgraded CPI CG Inc.’s backed senior secured notes to B3 from B2, while maintaining the B2 corporate family rating (CFR) for parent company CPI Card Group Inc (NASDAQ:PMTS).

The downgrade follows CPI’s recent expansion of its ABL revolver to $100 million from $75 million and the retirement of $20 million of senior notes. According to Moody’s, this transaction results in the senior secured notes comprising a smaller portion of the total capital structure, with a larger revolving debt now subordinating the rated senior secured notes.

Despite the downgrade of the notes, Moody’s views the overall transaction as credit positive due to CPI’s improved liquidity profile and slightly reduced leverage following the partial retirement of senior notes.

CPI Card Group’s B2 CFR reflects several challenges including small scale, high product and customer concentration, limited pricing leverage with largest customers, and potential disintermediation threats from new technologies. However, the company benefits from its solid position in the US market as a provider of financial payment cards and services to financial institutions of various sizes.

The credit profile is supported by recurring demand for payment cards based on reissuance volume and ongoing conversion to contactless smart cards in the US. Moody’s projects mid-single digit annual organic revenue growth through 2026, supported by continued growth in the debit and credit segment.

CPI maintains good liquidity over the next 12-18 months, supported by $32 million in cash as of March 31, 2025, access to the expanded $100 million ABL revolver facility, and expectations for moderately positive free cash flow.

The stable outlook reflects Moody’s expectation that CPI will generate mid-single digit annual organic revenue growth while maintaining leverage in the mid-to-high 3x range over the next 12 to 18 months.

CPI Card Group Inc. is a provider of payment card production and related services, offering credit, debit and prepaid debit cards including EMV chip and dual-interface, personalization, instant issuance, fulfillment and digital solutions. The company generated revenues of $491 million in the twelve months ended March 2025.

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