S&P cuts Charming Charlie, loan to CCC+

S&P said it lowered its corporate credit rating on Charming Charlie LLC to CCC+ from B-.

The outlook is negative.

At the same time, the agency downgraded the issue-level rating on the company's $150 million senior secured term loan to CCC+ from B-. The 3 recovery rating remains unchanged, indicating an expectations for meaningful recovery in the event of default. The recovery expectation is in the higher end of the 50% to 70% range.

The capital structure also consists of a $60 million asset-based loan (ABL), which the agency does not rate.

"The downgrade reflects our view that the company's weak operating performance will likely persist over the next 12 months, and that the company may need additional relief to prevent it from violating covenants under its credit agreement,” S&P credit analyst Adam Melvin said in a news release.

“Longer-term, we believe the company may seek to reduce debt with a distressed exchange if performance does not improve.

“In addition, though the company recently cut a sizable amount of costs from its operations, cash flow generation will remain pressured due to the soft retail environment where spending for discretionary items has declined."

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