Fitch downgrades Sears

Fitch Ratings said it downgraded the long-term issuer default ratings on Sears Holdings Corp. and its various subsidiary entities to B from B+.

The ratings on various tranches of debt also have been downgraded by a notch, Fitch said.

The outlook is negative.

The ratings downgraded include Sears Holdings' long-term issuer default rating to B from B+, secured bank facility to BB with a recovery rating of RR1 from BB+ with a recovery rating of RR1 and second-lien secured notes to BB with a recovery rating of RR1 from BB+ with a recovery rating of RR1.

Sears, Roebuck and Co.'s long-term issuer default rating also was downgraded to B from B+, along with Sears Roebuck Acceptance Corp.'s long-term issuer default rating to B from B+ and senior unsecured notes to B with a recovery rating of RR4 from B+ with a recovery rating of RR4. Its short-term issuer default rating was affirmed at B and commercial paper rating at B.

Sears DC Corp.'s long-term issuer default rating also was downgraded to B from B+ and senior unsecured notes to B with a recovery rating of RR4 from B+ with a recovery rating of RR4.

Kmart Holding Corp.'s long-term issuer default rating was downgraded to B from B+.

The agency also said it assigned a long-term issuer default rating of B to Kmart Corp.

The downgrades reflect continued deterioration in EBITDA on worse-than-expected top line growth, with a precipitous decline during the first quarter of 2011, Fitch said.

As a result, credit metrics continue to be pressured and leverage could increase by an additional turn or more in 2011 from 4.6x in 2010, the agency said, and be potentially higher in 2012 and 2013.

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