S&P downgrades Southern States

Standard & Poor’s said it lowered the corporate credit rating on Southern States Cooperative Inc. to B- from B.

The agency also said it lowered the rating on the company’s senior secured second-lien notes to B- from B. The recovery rating on the debt remains at 4, indicating 30% to 50% expected default recovery.

Southern States is expected to have about $213 million in reported debt outstanding as of June 30, S&P said.

The outlook is stable.

The downgrades reflect projections for continued weaker-than-expected credit measures with negative free cash flow generation and adjusted debt-to-EBITDA exceeding 5x at fiscal year-end, S&P said.

But, the cooperative has a relatively solid market position as a regional distributor on the U.S. East Coast, with an installed wholesale and retail distribution footprint across key farming areas, the agency said.

Nevertheless, its sales and operating performance are largely dependent on the spring selling season, when the cooperative historically generates more than 60% of its EBITDA, S&P added.

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