S&P lowers Edcon

Standard & Poor's said it lowered to B- from B the long-term corporate credit rating on Edcon Holdings (Proprietary) Ltd., its senior unsecured floating-rate notes due 2015 to CCC from CCC+ with 6 recovery rating and its senior secured floating-rate notes due 2014 issued by Edcon (Proprietary) Ltd. to B from B+ with 2 recovery rating.

The outlook is stable.

The downgrade reflects the lack of reported improvement in the group's credit protection metrics, the agency said.

"In our view, high unemployment and consumer debt are likely to continue to weigh on retail trading conditions in South Africa, thereby lowering our visibility on Edcon's trading performance over financial 2011," S&P analyst Diego Festa said in a statement.

"We do not foresee a rapid reduction in the group's high indebtedness in the near term, mainly due to Edcon's relatively limited potential to convert its operating profits into cash. This is primarily due to the group's high cash interest burden."

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