S&P expects to lower Jones Group after acquisition

Standard & Poor's said the ratings on Jones Group Inc., including the BB- corporate credit rating, remain on CreditWatch with negative implications.

Following the completion of the pending acquisition by financial sponsor Sycamore Partners, the agency said it expects to withdraw the corporate credit and issue-level ratings on Jones and assign lower issue-level ratings to the successor company.

In particular, S&P said it anticipates that the existing $400 million 6 7/8% unsecured notes due 2019 and the $250 million 6 1/8% unsecured notes due 2034 will be assumed by Jasper Merger Sub Inc., which is the surviving footwear and jeanswear business.

As such, upon completion of the transaction, the agency said it expects to assign a B- unsecured debt rating and 5 recovery rating to this debt, indicating 10% to 30% expected default recovery.

S&P also said it expects the unsecured notes due 2014 to be repaid.

Following Sycamore's $2.2 billion acquisition of the Jones Group and concurrent carve-out of Jones Apparel, Stuart Weitzman and Kurt Geiger, Jasper Merger Sub will be the new borrower for the unsecured notes that will remain outstanding, the agency said.

The transaction is expected to close during the second quarter of 2014.

The negative watch reflects that lower ratings are expected upon completion of the pending acquisition transaction, S&P added.

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