S&P cuts Oriental Trading ratings

Standard & Poor's said it lowered its ratings on Oriental Trading Co. Inc., including the corporate credit rating to B+ from BB- and the senior secured credit facility to B+ from BB-.

S&P also assigned its B- rating to Oriental Trading Co. Inc.'s new $80 million second-lien senior secured credit facility. Proceeds of the proposed second-lien credit facility and $30 million add-on to the existing term loan B will be largely used to pay a common stock dividend. Pro forma for the transaction, Oriental Trading will have about $354 million in funded debt.

The agency said the downgrade is based on a significant increase in debt leverage from the proposed transaction and a more aggressive financial policy. Pro forma for the transaction, total debt to EBITDA is expected to increase to about 4.5x from current levels of low-3x, and EBITDA interest coverage is expected to deteriorate to about 3.9x from more than 5x.

S&P said the ratings reflect the company's participation in the highly competitive and fragmented toys, novelties, party supplies, and home decor retailing industries, high debt leverage and a relatively small cash flow base.

These risks are somewhat offset by its position as the leading direct marketer of valued-priced toys, novelties, and party supplies, and its stable cash flow generation.

© 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.