On September 21, 2017, S&P Global Ratings lowered its corporate credit rating on Charlotte Russe, Inc. to CCC- from CCC+ and its first-lien debt rating to CCC- from CCC+. According to S&P Global, the downgrade reflects S&P’s view that the probability of financial restructuring, including at least some of the Company’s debt obligations, at less than par is likely within the next six months. S&P states this view reflects the Company’s sizable term loan obligations that mature in May 2019 and their belief that the Company lacks prospects for a strong, sustained rebound amid an increasingly competitive specialty apparel environment. S&P believes capital market access for the Company could be restricted given reduced investor appetite for distressed retailers.
On September 18, 2017, S&P Global Ratings lowered its corporate credit rating on PetSmart, Inc. to B from B+, its $4.3 billion first-lien term loan due 2022 to B from B+, its $1.35 billion senior secured notes due 2025 to B from B+, as well as its $1.9 billion senior unsecured notes due 2023 and the $650 million senior unsecured notes due 2025 to CCC+ from B-. According to S&P Global, the downgrade on PetSmart reflects lower expectations for profits and cash flows that will delay the anticipated improvement in credit metrics. S&P states that the factors contributing to these downward revisions include greater competition in the pet retailing space with mass retailers and other online retailers competing aggressively for pet food market share. Further, S&P thinks management turnover will complicate operational and acquisition execution. Read more on distressed companies.