S&P lowers David's Bridal

S&P said it lowered its corporate credit rating on David's Bridal Inc. to CCC+ from B-. The outlook is negative.

At the same time, S& cut the issue-level rating on the company's secured term loan facility to CCC+ from B- and the issue-level rating on the company's unsecured senior unsecured notes to CCC- from CCC. The 3 recovery rating on the term loan facility reflects an expectation for meaningful (50%-70%; rounded estimate: 60%) recovery in the event of a payment default. The 6 recovery rating on the unsecured notes reflects an expectation for negligible (0%-10%; rounded estimate: 0%) recovery prospects in the event of a payment default.

“The downgrade reflects our growing liquidity concerns and uncertainty around identifying a path to meaningfully higher earnings growth that can support David's Bridal's onerous capital structure, even though the company does not face any debt maturities with the next 12 months,” said S&P credit analyst Mathew Christy in a news release.

"We view the company's financial obligations as unsustainable over the long term, and project operating performance will worsen and lead to weaker credit protection metrics and negative free operating cash flow. In addition, we think weak operating performance could potentially hinder the company's ability to refinance the $520 million term loan maturing in 2019,” the agency said in the release.

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