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S&P cuts Reader's Digest to CCC+
Standard & Poor's said it lowered the corporate credit rating on Reader's Digest Assn. Inc. to CCC+ from B and on its $525 million senior secured notes to CCC from B.
The recovery rating was revised to 5 from 4, because the company obtained a new $45 million secured term loan on Aug. 12, which ranks senior to the notes.
The outlook is negative.
"We lowered the ratings based on the company's weak second-quarter results, its narrow cushion of compliance with financial covenants, vulnerability to economic cyclicality, and our view that its weakened brands and eroding consumer confidence could further reduce liquidity," S&P analyst Tulip Lim said in a statement.
The rating reflects secular pressure in Reader's Digest's publications business, highly competitive publishing business and minimal growth prospects in its direct marketing business, the agency said.
The rating also reflects the dated image of the Reader's Digest flagship magazine, the agency noted.
The company's adjusted debt-to-EBITDA ratio is roughly 5.4x for the 12 months ended June 30.
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