S&P downgrades rue21, loan to CC

S&P said it lowered the corporate credit rating on rue21 Inc. to CC from CCC-.

The outlook is negative.

At the same time, the agency downgraded the issue-level rating on the company's secured term loan facility to CC with a 4 recovery rating, indicating average expected recovery (30%-50%; rounded estimate: 35%) in the event of a default.

The issue-level rating on the senior unsecured notes is unchanged at C with a 6 recovery rating, indicating negligible expected recovery (0%-10%; rounded estimate: 0%).

"The downgrade reflects our view that a default is a virtual certainty. It follows rue21 entering into a forbearance with its term loan lenders and extending the interest deadline until the end of April 2017," S&P credit analyst Mathew Christy said in a news release.

"Despite this forbearance extension, we expect the company will be unable to make contractual payments and see a restructuring action as a virtual inevitability."

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