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Moody's lowers Pep Boys
Moody's Investors Service said it downgraded Pep Boys' - Manny, Moe & Jack's corporate family and probability-of-default ratings to B2 from B1 and its $200 million senior subordinated notes due 2014 to Caa1 (LGD5, 86%) from B3 (LGD5, 82%).
The agency affirmed the $155 million senior secured term loan due 2013 at Ba3 (LGD2, 23% from 29%).
The outlook is negative.
The downgrade was prompted by the company's weak credit metrics, slim margins, negative comparable stores sales trend and negative free cash flow, according to the agency.
Pep Boys' B2 corporate family rating is constrained by the company's weak interest coverage and EBITA margin and its negative free cash flow, the agency said.
Ratings are supported by the company's scale, moderate product volatility and the positive long-term business fundamentals, Moody's said.
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