S&P affirms Spencer Spirit after add-on

Standard & Poor’s said it affirmed the B corporate credit rating on SSH Holdings Inc., the direct parent of Spencer Spirit Holdings Inc.

The agency also said it affirmed the B rating on the company’s first-lien secured term loan and revised the recovery rating to 4 from 3, indicating 30% to 50% expected default recovery.

SSH Holdings is issuing a $110 million add-on to its first-lien loan to be used to buy out the remaining minority position owned by the equity sponsor.

The company also plans to issue $135 million of second-lien term loan debt, which won’t be rated. It will be used to redeem in full the 9% payment-in-kind toggle holding company senior notes, S&P said.

The outlook is stable.

The ratings reflect an expectation that operating performance and credit metrics will remain generally stable, despite some modest increase in leverage following the new debt issuance, the agency said.

The ratings also consider Spencer’s participation in the highly competitive and fragmented specialty teen apparel and gift industry, which is facing declining mall traffic and heightened price competition from fast-fashion and online players, S&P said.

The ratings also take into account Spirit’s exposure to the seasonal Halloween business and the challenges involved in opening and closing about 1,100 pop-up stores within a few months every year, the agency said.

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