S&P cuts Gymboree, loan & notes

Standard & Poor's said it lowered its corporate credit rating on Gymboree Corp. to CCC+ from B-.

The outlook is developing.

At the same time, the agency lowered its issue-level rating on the company's $820 million senior secured term loan to CCC+ from B-. The recovery rating on this debt instrument remains unchanged at 3, indicating an expectation for meaningful (50%-70%) recovery in the event of default.

S&P also lowered the issue-level rating on Gymboree's $400 million senior unsecured notes to CCC- from CCC. The 6 recovery rating is unchanged, indicating an expectation for negligible (0%-10%) recovery in the event of default.

"Our rating action reflects continuing weak operating performance and our expectation for further profitability erosion and weakening liquidity in the upcoming quarters," S&P credit analyst Mariola Borysiak said in a news release. "We assess Gymboree's business risk profile as "vulnerable", reflecting its participation in a very competitive and fragmented children apparel industry, vulnerability to cotton price inflation, and fashion missteps."

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