A broad group of first lien lenders to Magenta Buyer recently tapped Akin Gump as legal counsel amid the company’s deteriorating earnings performance, according to two sources familiar with the matter.

The Symphony Technology Group-backed company, which operates under the Trellix and Skyhigh Security brands, reported late last year that 3Q23 total revenue fell 11% YoY to USD 407m compared to USD 457m clocked in the prior year period, as reported.

A separate group of lenders in the issuer’s USD 3.1bn S+500bps first lien loan formed and is working with Gibson Dunn as legal counsel, according to one of the sources.

Liquidity as of 30 September 2023 stood at USD 198m, split between USD 77m of cash and USD 121m revolver availability, as reported. For reference, the company has USD 141m of cash as of 30 June and had started 2023 with USD 304m in cash, as reported.

The company’s burgeoning interest expense over the past four quarters has also added further strain on the company’s balance sheet. Interest expense totalled USD 372m in the nine months ended 30 September 2023 compared to USD 218m over the same period in 2022, as reported.

S&P Ratings last month downgraded the company a notch to CCC+, citing the borrower’s declines in recurring and non-recurring revenues. Although the ratings agency expects Magenta will improve its profitability in fiscal year 2024, it could generate negative free operating cash flow due to reduced non-recurring revenue. S&P said it believes the company has sufficient liquidity and access to its full revolver.

Magenta’s USD 3.1bn first lien TLB due 2028 is quoted at 66.53/68.25 today, moving steadily lower this month compared to quotes at 70.25/772.88 on 1 January. Its USD 413m first lien TL due 2028 has similarly traded lower this month, last quoted at 73/75.88 today compared to 75/80 on 1 January, according to Markit. Meanwhile, its USD 750m second lien TL due 2029 is quoted at 35.92/38.67 today compared to quotes at 38/42 at the beginning of this month.

Calls to Akin, Gibson Dunn, the company and STG were not returned.