S&P cuts Chesapeake to SD

Standard & Poor's said it lowered the corporate credit rating on Chesapeake Corp. to SD from CCC-, which indicates a selective default. The agency lowered Chesapeake's 10 3/8% sterling-denominated subordinated notes due 2011 to D from CC. The euro-denominated subordinated notes is rated CC.

The actions stem from an assessment that the Nov. 15 coupon payment date on the sterling-denominated notes was likely blocked from being paid by the secured lenders under Chesapeake's $250 million revolving credit facility because of the company's distressed financial situation, which was caused by weak cash flows and high leverage, the agency said.

While a payment default has not occurred under the legal provisions of the notes, S&P said it considers a default to have occurred when a payment related to an obligation is not made.

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