S&P downgrades TitleMax

S&P said it affirmed the issuer credit rating on TMX Finance LLC at B-.

The outlook remains negative.

The agency also said it downgraded the issuer credit rating on TitleMax Finance Corp. (as a ratings correction) to B- from B.

The outlook is negative.

S&P also said it affirmed the issue ratings on TMX's 8½% senior notes due 2018 at B-.

The recovery rating on these notes remains at 4, indicating 45% to 50% expected default recovery.

The issuer credit rating reflects weak financial performance due to the company's steep decline in loan originations and EBITDA, coupled with pending potential regulatory changes and litigation risks, S&P said.

The agency said it expects the company's leverage to remain at higher than 5x and EBITDA coverage will remain at less than 2.5x for the next 12 months.

Based on the leverage calculation, which is adjusted for operating leases, leverage was 5.3x and EBITDA coverage was 2.1x in 2016, compared with 3.7x and 3.1x in 2015, S&P said.

TitleMax was downgraded because the agency said it should have lowered the rating in November when S&P lowered the rating on TMX Finance.

The rating on the debt co-issued by TMX Finance and TitleMax Finance was correctly lowered in November 2016, the agency said.

The negative outlook considers the refinancing risks and the company's deteriorating financial performance, S&P said.

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