S&P drops American Greetings outlook to stable

Standard & Poor's said it revised its outlook on American Greetings Corp. to stable from positive and affirmed all the ratings on the company, including the BB+ corporate credit rating.

In addition, S&P affirmed the BBB issue-level rating on the company's $400 million senior secured revolving credit facility due 2017. The recovery rating remains 1, indicating S&P's expectations of a very high (90%-100%) recovery upon a payment default.

S&P also affirmed the BB+ issue-level rating on the 7 3/8% senior unsecured notes due 2021. The recovery rating remains 4, indicating S&P's expectations of average (30%-50%) recovery in the event of a payment default.

"The outlook revision reflects our view that credit measures will weaken following the acquisition of Clinton Cards plc," said S&P credit analyst Stephanie Harter in a news release.

"The acquisition will add additional operating leases given the increased retail component, and as the company continues to invest in information systems upgrades and a new world headquarters. Furthermore, margins have declined because of American Greetings' further penetration into the lower margin value channel."

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