S&P downgrades Qurate Retail

S&P said it lowered Qurate Retail Inc.’s issuer rating to CCC+ from B- and subsidiary QVC Inc.'s secured debt two notches to B- from B+. The agency also revised the recovery ratings to 2 from 1 indicating substantial (70%-90%; rounded estimate: 70%) recovery in default.

“Declining customer counts and cost control challenges continue to weigh on Qurate's earnings and cash flow. In fiscal 2022, S&P Global Ratings-adjusted leverage rose sharply to 7.4x from 3.8x in 2021 due to both higher debt and lower EBITDA. Reported free operating cash flow was negative $119 million versus positive $794 million by our calculations in fiscal 2021,” the agency said in a press release.

S&P also warned that Qurate’s capital structure may be unsustainable. “We expect Qurate's adjusted leverage to remain high, above the 6x area in 2023. The company is burdened by more than $7 billion of funded debt. Among its staggered debt maturities, $600 million are due in March 2024 with about $1 billion outstanding as of year-end under its revolving credit facility due in 2026.”

The outlook is negative.

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