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S&P downgrades Matalan, notes
S&P said it lowered its long-term corporate credit rating on Missouri Topco Ltd., the holding company for Matalan, to CCC from CCC+.
The outlook is negative.
At the same time, the agency downgraded its issue rating on Matalan Finance Ltd.'s first-lien notes to CCC from CCC+ and its issue rating on the second-lien notes to CC from CCC-, in line with the corporate credit rating. The 4 recovery rating on the first-lien notes indicates an expectation of average recovery in the higher half of the 30%-50% range in the event of a payment default. The 6 recovery rating on the second-lien notes indicates an expectation of negligible recovery of 0%-10% in the event of a payment default.
On Jan. 9, Matalan announced that it may contemplate future purchases of its outstanding debt through open market purchases, privately negotiated transactions or other events. At the same time, the company lowered its EBITDA guidance to between £75 million and £77 million from between £80 million and £85 million previously.
This revised guidance remains commensurate with the agency’s current base case and reflects an improvement in operating performance year-over-year.
S&P said the downgrade reflects its view of an increasing likelihood of Matalan purchasing portions of its debt in the secondary market over the next 12 months, following its recent trading update in which it indicated such transactions may be considered.
“We understand Matalan does not yet have firm plans in place to repurchase any of its debt, and that any such repurchases would depend upon prevailing market conditions, the company's liquidity requirements, and contractual restrictions,” the agency said in a news release.
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