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Investing.com -- S&P Global Ratings has upgraded LendingTree Inc.’s issuer credit rating to ’B’ from ’B-’, citing the company’s improved leverage and free operating cash flow (FOCF) to debt coverage. The rating agency also raised the issue-level rating on LendingTree’s senior secured debt to ’B’ from ’B-’, while maintaining the recovery rating at ’3’.
LendingTree finished 2024 with S&P Global Ratings-adjusted gross leverage below 6x and FOCF to debt coverage above 5%, surpassing the upgrade thresholds at the ’B-’ rating. The company’s leverage is expected to improve further in 2025 to 4.5x due to upcoming mandatory debt repayments and modest EBITDA growth.
LendingTree has $115 million of convertible notes maturing in July 2025, which the company is expected to fully repay either before or at their maturity. With cash on hand of $107 million at the end of 2024 and full availability under its $50 million delayed draw term loan facility, the company is well-positioned to reduce its debt. The company is also expected to generate $20 million-$30 million of reported FOCF through the first six months of 2025 that can be used for debt reduction.
The positive outlook reflects S&P Global Ratings’ expectation that LendingTree could further reduce its leverage to comfortably below 5x while approaching FOCF to debt coverage of at least 10%. However, the company’s advertising revenue is highly exposed to economic cyclicality, which could impede future deleveraging.
S&P Global Ratings expects LendingTree’s adjusted EBITDA to grow about $5 million in 2025 to $104 million, driven by expected growth in its home equity and small business loan products as well as 2%-4% growth in its insurance business.
The rating agency notes that LendingTree’s performance is highly susceptible to economic cyclicality, and visibility into 2025 performance remains limited due to unpredictability around policy implementation by the U.S. administration and potential effects on economies, supply chains, and credit conditions around the world.
The outlook could be revised to stable if S&P Global Ratings expects LendingTree to sustain leverage above 5x or FOCF to debt coverage well below 10%. This could occur if macroeconomic conditions deteriorate, leading to declining user traffic and/or advertising spending from LendingTree’s customer acquisition partners; or if competition from competitors, including generative AI platforms, increases, leading to declining user traffic to LendingTree and subsequently revenue and EBITDA.
S&P Global Ratings could raise its ratings on LendingTree over the next 12 months if the company is able to sustain leverage comfortably below 5x and its FOCF to debt coverage approaches 10%.
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