S&P cuts Skylark to junk

Standard & Poor's said it lowered its long-term corporate credit and senior unsecured debt ratings on Skylark Co. Ltd. by two notches to BB from BBB-, reflecting expectations for weakening profitability and a deterioration in its debt structure over the next one to two years, due to an increase in bank borrowings to carry out a management buyout and to enhance the profitability of its existing restaurants.

The outlook is stable.

At the same time, the ratings on Skylark were removed from CreditWatch where they were placed with negative implications on June 9, following the company's announcement that it would conduct an MBO through a tender offer for Skylark shares, aimed at privatizing the company, the agency said.

S&P added that with the Japanese restaurant industry facing intensifying competition and rising hourly wages and utility charges, organic growth of profitability and cash flow is unlikely.

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