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S&P puts MEGA on watch
Standard & Poor's said it placed the B+ long-term corporate credit and bank loan ratings of MEGA Brands Inc. on CreditWatch with negative implications. The 3 recovery rating on the bank loan is unchanged.
The CreditWatch placement reflects S&P's concerns that revenues, earnings and credit protection measures at MEGA Brands did not meet expectations for the third quarter ended Sept. 30 and could remain weaker than expected in the medium term due to challenges the company faces. Revenues in the third quarter declined 9% compared with the same quarter of the previous year because of lower Magnetix product sales and production delays in Asia, and the debt-to-EBITDA ratio increased to more than 5 times for the last 12 months ended Sept. 30.
The agency noted that MEGA Brands was in compliance with its financial covenants and liquidity remained adequate for the ratings at Sept. 30.
The CreditWatch listing will be resolved after S&P reviews Mega Brands' operating, strategic and financial plans.
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