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S&P downgrades Kellermeyer
Standard & Poor’s said it lowered the corporate credit rating on Kellermeyer Bergensons Services LLC to B- from B.
The agency also said it lowered the ratings on the first-lien credit facility to B- from B. The recovery rating on this debt is 3, indicating 50% to 70% expected default recovery.
S&P also said it lowered the rating on the second-lien debt to CCC from CCC+. The recovery rating on this debt is 6, indicating 0 to 10% expected default recovery.
The outlook is negative.
The downgrades reflect the narrowing cushion on the debt’s financial covenant and the company’s high debt leverage resulting from weaker-than-anticipated performance, S&P said.
Although the agency said it anticipates modest profit growth in 2016 from new business acquisition, the company is vulnerable to pricing pressure from its large retail customers and lackluster consumer spending.
As a result, S&P said it believes the company may breach its total debt leverage covenant in the quarter ending Dec. 30 as this covenant becomes more restrictive.
The forecasted base-case debt leverage is expected to remain elevated in the high-8x range at the end of 2015, the agency said.
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