S&P lowers Tops Holding, notes

S&P said it lowered the corporate credit rating on Tops Holding LLC to CCC+ from B-.

The outlook is negative.

At the same time, the agency downgraded the issue-level rating on the company's senior secured notes to CCC+ from B-. The 3 recovery rating is unchanged, indicating an expectation for meaningful (50% to 70%; rounded estimate: 55%) recovery in the event of default.

Additionally, S&P lowered the issue-level rating on the company's senior unsecured notes to CCC- from CCC. The recovery rating remains 6, reflecting an expectation for negligible (0% to 10%; rounded estimate: 0%) recovery in the event of default.

"The downgrade reflects increasing refinancing risk as a result of the company's 2018 HoldCo note maturity, soft performance trends, weak cash flow generation, and elevated leverage. We believe the company can repay a portion of the HoldCo notes ($85.5 million outstanding as of Dec. 31, 2016) via its revolver and cash," S&P credit analyst Declan Gargan said in a news release.

"However, we think Tops will need to refinance the majority of the outstanding amount this year. Additionally, we believe the company's weak financial condition amid a backdrop of challenging industry conditions raises the possibility of a distressed exchange."

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