S&P trims Quad/Graphics outlook, loan rating

Standard & Poor's said it revised its outlook on Quad/Graphics Inc. to negative from stable and affirmed its BB+ corporate credit rating on the company.

In addition, S&P revised the recovery rating on Quad's senior secured credit facilities to 3, indicating an expectation of meaningful (50% to 70%) recovery for lenders in the event of a payment default, from 2 (70% to 90% recovery expectation).

As per S&P's notching criteria for a 3 recovery rating, the agency also lowered the issue-level rating on this debt to BB+ from BBB-. The recovery rating change reflects a revision of the EBITDA multiple used to value the company in our hypothetical default scenario, to 4.5x from 5.0x.

"The outlook revision reflects the potential for a downgrade if Quad's revenue continues to decline at a mid-single-digit rate and we become convinced that EBITDA will meaningfully contract further, or if we become convinced debt leverage will rise above 3x on a sustained basis," said S&P credit analyst Tulip Lim in a news release.

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