Fitch cuts, then lifts, Sears

Fitch Ratings said it downgraded the long-term issuer default ratings of Sears Holdings Corp., Sears Roebuck Acceptance Corp. (SRAC) and Kmart Corp. to RD from C following the closing of its distressed debt exchange (DDE) announced Jan. 23.

The company exchanged $170 million of its $303 million of 6 5/8% senior second-lien notes due 2018 to $170 million senior secured convertible PIK toggle notes due 2019, $214 million of its $625 million 80% senior subordinated notes due 2019 into senior unsecured PIK toggle notes due 2019 and $100 million of unsecured SRAC notes into like principal PIK notes due March 2028.

“Fitch views these exchanges as a DDE, given extension of maturity date and the change in interest from cash-pay basis to PIK. While the exchanges and amendments are expected to result in annual cash interest savings of around $60 million, this transaction does not materially change Fitch's expectations for annual cash burn, at $1.2 billion to $1.3 billion in 2018,” the agency said in a news release.

Subsequently, Fitch upgraded Sears’ long-term issuer default rating to CC from RD, which it believes is reflective of the post-DDE credit profile given ongoing restructuring concerns.

The agency also assigned a rating of CCC/RR2 to the extended portion of the second-lien secured notes, as these rank pari passu to the second-lien credit agreement and downgraded the non-extended second-lien secured notes of Sears Holdings to C/RR6 from CC/RR3 given this has been subordinated.

© 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.