S&P lowers Quantum

Standard & Poor's said it lowered its corporate credit rating on Quantum Corp. to CC from B- and its subordinated ratings to C from CCC and placed these ratings on CreditWatch with negative implications.

The agency also placed the company's B- senior secured rating on CreditWatch with developing implications.

These actions follow the company's announcement that it began a cash tender offer to purchase up to $142 million of its outstanding subordinated notes due 2010 for $700 each. Quantum will finance the offer with a $100 million term loan it expects to receive from EMC Corp.

S&P said it views the tender offer as a distressed exchange given the substantial discount to par and its view that Quantum faces considerable near-term stress because of a provision in its senior secured credit agreement that requires refinancing of at least $135 million of its convertibles by early 2010.

At the same time, the agency said it expects that if the tender and a planned credit amendment are executed as proposed, it would raise the corporate credit rating to B with a stable outlook due to the elimination of refinancing risk until 2014 and lower leverage.

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