S&P downgrades Outerwall

Standard & Poor’s said it lowered the corporate credit rating on Outerwall Inc. to BB- from BB+, along with the ratings on its first-lien facilities, including the $600 million revolving credit facility due 2019 and $150 million term loan due 2019, to BB from BBB.

The recovery rating on the facilities was revised to 2 from 1, indicating 70% to 90% expected default recovery.

S&P also said it lowered the ratings on the company’s $350 million unsecured notes due 2019 and $300 million unsecured notes due 2021 to B from BB-.

The recovery rating for each tranche of the unsecured notes is unchanged at 6, indicating 0 to 10% expected default recovery.

The outlook is negative.

The ratings reflect an assessment that Redbox, the company’s largest operating segment, is in a secular decline and facing stronger-than-anticipated competitive pressure from online streaming services and on-demand services from cable and satellite providers, the agency said.

The negative outlook reflects an expectation that the decline in the DVD rental segment will lead to lower revenue and cash flow, S&P added.

Over the next few years, the company is expected to maintain credit metrics near current levels, including a debt-to-EBITDA ratio in the mid-2x range, the agency said.

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