Moody’s downgraded Israeli spyware company NSO Group by two notches to Caa2, eight notches below investment grade. The Investors Service company warned that the NSO Group faces an increasing risk of default due to $500 million in debt following unusually difficult cash flow conditions.
NSO was valued at $1 billion just two years ago. However, the company is currently defending itself against allegations that its Pegasus spyware, which penetrates mobile phones, is being used by governments to monitor politicians, journalists, and human rights activists. NSO disputes the claims, claiming that its malware assists governments in combating terrorism and organized crime.
Moody’s stated that if creditors continue to insist on NSO paying its $500 million debts, the company’s ongoing existence will be jeopardized. According to Moody’s, NSO had only $29 million in free cash in June after fully utilizing its $30 million banking credit line.
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Despite this, the US Department of Commerce blacklisted the corporation, claiming that it was conspiring against the country’s national defense and foreign interests. This action restricts NSO’s future exports, making it much more difficult for the company to recover financially.
Even before the US blacklisting and the exhaustive investigation by Amnesty International and Forbidden Stories, NSO showed negative cash flow and a decline in profits last year. According to Moody’s, the challenges have gotten worse over the last year, and a slowdown in sales is likely as a result of the new US limitations.