S&P downgrades LKQ

Standard & Poor’s said it downgraded LKQ Corp. to BB from BB+ and removed all of its ratings on the company from CreditWatch, where S&P placed them with negative implications on Dec. 22.

The outlook is stable.

At the same time, S&P revised the issue-level ratings on LKQ’s senior unsecured notes to B+ from BB-. The 6 recovery rating remains unchanged, indicating an expectation for negligible recovery (0%-10%) in a payment default scenario.

Additionally, S&P revised the recovery ratings on LKQ’s secured debt to 2 from 3, indicating an expectation for substantial recovery (70%-90%; lower half of the range) in a payment default scenario. The BB+ issue ratings on the debt remain unchanged.

“We downgraded LKQ to reflect the risks related to the integration of its recent acquisitions and the associated EBITDA margin pressure,” said S&P credit analyst Lawrence Orlowski in a news release.

“The company expects to fund these acquisitions with debt; therefore, we believe that its credit metrics will be somewhat weaker than we had previously expected.”

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