Israeli Spyware Firm NSO 'At Risk of Defaulting' After U.S. Blacklisting

Moody's drops credit rating for Israel's NSO Group, whose Pegasus software is used to hack cell phones. The firm was added to an American trade blacklist earlier this month

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A logo adorns a wall on a branch of the Israeli NSO Group company, near the southern town of Sapir, in August.
A logo adorns a wall on a branch of the Israeli NSO Group company, near the southern town of Sapir, in August.Credit: Sebastian Scheiner,AP

Israeli spyware firm NSO stands at risk of defaulting on around half-a-billion dollars' worth of debt, which would force it into insolvency, credit rating agency Moody’s warned on Monday.

The announcement came in the wake of Washington’s announcement earlier this month that it was blacklisting the company for activities contrary to the United States' national security or foreign policy interests.

NSO Group, whose Pegasus software is used to hack cell phones, is valued at over one billion dollars. On November 3, the U.S. Commerce Department said that it was adding the company to a trade blacklist, restricting its access to U.S. technology and potentially hobbling its ability to do business. The company's tools were used by foreign governments "to maliciously target government officials, journalists, businesspeople, activists, academics, and embassy workers," the statement read.

Over the years, countless investigations, spearheaded by the Pegasus Project, have been published on NSO in particular and the misuse of its spyware. Pegasus software was reportedly used by client governments such as Bahrain, the United Arab Emirates, India, Hungary and other states to surveil the phones of reporters, lawyers, opposition politicians and civil society workers around the world.

According to Bloomberg, Moody’s dropped NSO’s credit rating by two levels, asserting that the company’s risk of defaulting on its debts had increased and noting that the company has been losing money since 2020.

The company's status had previously been downgraded earlier this year. In February 2019, the company’s founders and a private investment fund jointly bought control of NSO at a valuation of $1 billion. But to conclude the deal, the founders, Shalev Hulio and Omri Lavie, took out $500 million in loans from two banks. These loans are rated by credit rating firms, who estimate the quality of the debt and its chances of being repaid.

Moody’s said in June that it downgraded the company’s rating from B2 to B3, adding that its outlook remains negative. The report said most of the debt is supposed to be repaid in March 2025.

Following the U.S. Commerce Department announcement, the New York Times reported that Jerusalem would petition Washington to remove the company from the blacklist, citing two senior Israeli officials in reporting that the Israeli government considers the cyberware a crucial component of its foreign policy and national security.

NSO’s senior management has lobbied Prime Minister Naftali Bennett and other ministers from his government to pressure the U.S. government to lift sanctions imposed against the company.

In a letter, they argued that the U.S. blacklisting arose from "an orchestrated campaign by anti-Israel organizations" that would result in hundreds of employees losing their job, according to Israeli news site Walla.

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