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Firm behind Pegasus phone-hacking scandal faces $500m default

Pegasus 1

NEW YORK: Israeli tech firm NSO Group is facing a $500 million default after being blacklisted in the US over its Pegasus phone-hacking technology.

NSO Group is accused of supplying spyware to governments and linked to hacking attempts on tens of thousands of smartphone numbers including at least one once used by Prime Minister Imran Khan.

Moody’s slashed NSO’s credit rating, putting it eight levels below investment grade. The US rating agency explained that the company is at increased risk of violating the terms of its debt agreements.

This comes after the spyware firm was added to a US trade blacklist following accusations that its military-grade Pegasus technology, aimed at preventing crime and terrorism, has instead been used by some of its clients to spy on human rights activists, journalists, and political dissidents.

NSO has repeatedly denied these claims, stressing that it has terminated a number of contracts “with government agencies that misused our products.”

The new export restrictions from Washington, added around three weeks ago, ban all dealings with the Israeli firm.

NSO reported negative cash flow last year, after being valued at about $1 billion following a management buyout in 2019. Moody’s analysts say the current decline in revenue and the distribution to shareholders may continue to drain the company for the rest of the year.

Moody’s estimates that NSO’s debt will exceed its earnings by nearly 6.5 times this year, while S&P Global Ratings puts the firm at B-, which means it still likely has the capacity to meet its financial obligations but is highly vulnerable to adverse economic conditions.

NSO had around $29 million of unrestricted cash as of June and drained its $30 million bank credit line.

The NSO Group has been in the headlines since 2016 when researchers accused it of helping spy on a dissident in a Middle Eastern country.

Israel’s Haaretz reported that India targeted a phone which was earlier in use of Prime Minister Imran Khan, through the malware. Several Pakistani officials, Kashmiri freedom fighters, Indian Congress leader Rahul Gandhi, an Indian supreme court judge were also targeted, it added.

According to a Pakistani private TV channel, India even tried to tap the federal cabinet members’ calls and messages through spyware, prompting the Pakistani government to develop new software for the federal ministers. However, no report confirmed that the attempt on Prime Minister Imran’s number was successful.

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