S&P drops Source Interlink to CCC

Standard & Poor's said it lowered Source Interlink Cos. Inc.'s corporate credit rating to CCC from B- and removed ratings from CreditWatch, where they were placed with negative implications on Dec. 18.

The outlook is negative.

"The downgrade reflects the effect of the recession and secular trends on the company's operating performance, its rising debt leverage and a thinning margin of compliance with its term loan financial covenant, along with limited liquidity," S&P analyst Hal F. Diamond said in a statement.

The action also reflects concerns regarding management's ability to achieve cost savings to offset revenue declines and generate positive discretionary cash flow, the agency said.

"We are concerned that secular and cyclical trends affecting the company's businesses, together with its tightening loan covenant, may become insurmountable," Diamond added.

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