S&P trims United Distribution, rates loan B-

S&P said it lowered its corporate credit rating on United Distribution Group Inc. to CC from CCC- and placed the rating on CreditWatch with negative implications.

At the same time, S&P assigned its B- issue-level rating and 3 recovery rating to the company's proposed $250 million senior secured first-lien term loan due 2023. The 3 recovery rating indicates an expectation that lenders will receive meaningful recovery (50%-70%; rounded estimate: 65%) in the event of a payment default.

In addition, S&P lowered its issue-level rating on UDG's first-lien revolving credit facility and term loan due October 2018 to CCC- from CCC. The 2 recovery rating is unchanged, indicating an expectation for substantial recovery (70%-90%; rounded estimate: 75%) in the event of a payment default.

The C issue-level and 6 recovery rating on the company's second-lien term loan due April 2019 are unchanged.

S&P said the downgrade follows UDG's announcement that it intends to exchange its second-lien term loan for an equal amount in preferred stock.

“We view the transaction as a distressed exchange because the preferred stock will have a more junior ranking in the capital structure and carry a later maturity date (pushed out to 2024 from 2019) than the second-lien term loan,” S&P said in a news release.

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