Fitch downgrades General Shopping Brasil

Fitch Ratings said it downgraded General Shopping Brasil SA's issuer default ratings to C from CC and its $250 million perpetual notes to C with recovery rating of RR4 from CCC with recovery rating of RR2.

Fitch also said it affirmed the rating on the company’s $150 million subordinated perpetual notes at C with recovery rating of RR5

The downgrades follow the company’s proposed debt exchange offering of its $150 million subordinated perpetual notes announced July 5, the agency said.

The proposed offering imposes a material reduction in the original terms and conditions of the subordinated perpetual notes to creditors, Fitch explained.

The completion of the exchange offering would result in the issuer default ratings being downgraded to restricted default (RD).

Shortly after the distressed-debt exchange is completed, the issuer default ratings will be reassessed, typically with ratings still in the highly speculative rating category, Fitch said.

The company’s capital structure is viewed as unsustainable due to excessive financial leverage, the agency said.

General Shopping’s free cash flow also is expected to remain negative due to excessive cash interest payments during 2016, Fitch added.

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