S&P downgrades GNC, rates loan B-, notes CCC

Standard & Poor's said it lowered General Nutrition Centers Inc.'s corporate credit rating to B- from B, senior secured rating to B- from B+, senior unsecured rating to CCC from B- and subordinated rating to CCC from CCC+.

The agency also assigned a B- rating with a recovery rating of 3 to GNC's proposed $750 million bank facility and CCC ratings to its proposed $300 million senior unsecured floating-rate notes due 2014 and $125 million senior subordinated notes due 2015.

All ratings were removed from CreditWatch with negative implications, where they were placed on Dec. 22, and the outlook is stable.

Proceeds from the new bank loan and notes, along with a $589 million equity investment, will be used to fund the purchase of GNC by an investor group comprised of Ares Management LLC and Ontario Teachers' Private Capital and to refinance existing debt.

The agency said the downgrade reflects a resulting capital structure that is highly leveraged, with a total pro forma lease-adjusted debt-to-EBITDA ratio of more than 7x and weak cash flow protection measures.

Positively, GNC's operating performance improved year-to-date 2006 because of solid comparable-store sales growth and better margins, which S&P in turn attributed largely to a new national pricing model and new marketing efforts.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.