S&P rates Carter's notes BB+

S&P said it assigned a BB+ rating to Carter's Inc.'s proposed $500 million senior unsecured notes due in 2027.

The recovery rating is 3, indicating 50% to 70% expected default recovery.

While the unsecured notes have more than 65% of calculated recovery prospects, the recovery rating is capped at 3 due to the company's ability to pledge security to raise new debt ahead of the unsecured notes.

The proceeds will be used to repay its $400 million 5¼% senior unsecured notes due in 2021 and reduce about $85 million of its unrated revolver's balance.

The proposed notes will be issued by the William Carter Co. and guaranteed by Carter's and substantially all restricted subsidiaries that guarantee the credit facility, S&P said.

All of the other ratings on Carter's, including its BB+ issuer credit rating, are unchanged.

S&P said it will withdraw the ratings on the company's 5¼% senior unsecured notes following their redemption.

Reported debt outstanding pro forma for the proposed transaction will be about $610 million.

The ratings reflect the company's position as the leading U.S. children's apparel retailer with a 17% market share, the agency said.

The company is an effective competitor despite slower growth in 2018 because of the weaker U.S. retail landscape, negative impact from the Toys 'R' Us bankruptcy and many retailers closing their stores, S&P said.

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