Despite reduced expenses, earnings have been pressured and the Glastonbury, Conn., company’s leverage “is high for the current rating,” Schlanger said.

“In our view, Open Solutions will be challenged to reverse its revenue trend, and its ability to materially reduce leverage over the coming year is uncertain,” Schlanger said.

David Mitchell, Open Solutions executive vice president and chief marketing officer, has a different view.

While its sales figures have not been publicly disclosed since Chairman/CEO Louis Hernandez took the company private more than four years ago, Mitchell said the firm saw “a material increase in our adjusted operating income on a sequential and year-over-year basis in 2011 and we expect that trend to continue in 2012.”

He said that included a 37% increase in third quarter 2011 operating income over third quarter 2010. An adjusted operating margin of 27.3% was a historical high for the company, he pointed out.

The “B” rating has not changed since the debt was issued in early 2007 and the S&P outlook downgrade issued in November may be related to much larger forces, Mitchell explained.

“Like everyone in the industry, we were impacted by the financial crisis with an increase in bank failures and merger activity,” Mitchell said, adding that “rising compliance costs, margin compression, reduced fee income alternatives and unceasing channel proliferation will continue to challenge credit unions’ business models.”

Recent debt problems in Europe have also had a magnified ratings effect on many companies with leverage even when the leverage is relatively inexpensive, as in Open Solutions' case, Mitchell speculated. Still, the company and its private equity investors obtained financing in 2007 at favorable rates, he added.

“To this day, a majority of our debt is at rates and terms that are substantially below market,” he said. “We believe there are a variety of alternatives available to us when the time is appropriate to refine our capital structure and leverage model.”

Mitchell said Moody’s, a competing rating service, kept its ratings the same on Open Solutions “while citing many positive trends that we ourselves have seen in the business.”

Those trends include the market’s response to the company’s upgrades in its flagship DNA suite and the launch of DNAcreator and DNAappstore. The app store allows developers to create new revenue for their employers by selling their software solutions to other Open Solutions customers. Since last May, more than 37,424 individuals have visited the DNAappstore and over 240 apps have been downloaded. Open Solutions has 3,400 clients.

As for its core processing client base, Open Solutions acquired several platforms during its growth through acquisition and adoption of its open platform. Recently, it has focused on its DNA products, which tend to be adopted by larger credit unions.

“We have seen run-off related to legacy products that we no longer market and we recently sunset certain legacy platforms,” Mitchell said. “We remain committed to our go-forward product lines and we have no further plans to sunset any of our remaining legacy platforms, namely TotalPlus. And, retention rates in these bases remain very strong.”

The “scalable and flexible” DNA platform will continue to be offered to large and small credit unions.

“We’ve experienced strong sales momentum over the past 18 to 24 months,” Mitchell said. “It’s a proven contemporary core solution and the only enterprise core solution that can be extended by its user community.”

According to Callahan & Associates’ latest Tech@CU quarterly publication, Open Solutions served approximately 305 credit unions representing $83.1 billion in assets in 2010, a 4% share based on the number of credit unions.

“Most data processors, though, focus on specific-size institutions, or have products designed for different sized credit unions,” said Lydia Cole, director of industry analysis at Callahan.

Of the company’s 305 credit union core processing clients, 236 were credit unions with more than $20 million in assets. Open Solutions held a 6.7% market share in 2010, Cole said. In 2008 and 2010, it was the fourth largest data processor serving credit unions with more than $20 million in 2010 and $25 million in assets in 2008. Data for 2009 was not available.