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S&P downgrades American Apparel
Standard & Poor's said it lowered its corporate credit rating on American Apparel Inc. to CCC- from CCC.
The outlook is negative.
At the same time, the agency lowered the issue ratings on the company's $200 million senior secured notes due 2020 to CC from CCC-. The recovery rating remains 5, indicating an expectation for modest recovery (10% to 30%) in the event of a payment default.
"The downgrade reflects our assessment that a debt restructuring appears inevitable within six months, absent unanticipated significantly favorable changes in the company's circumstances," S&P credit analyst Ryan Ghose said in a news release.
"We believe the company's financial covenant cushion remains thin and forecast a breach in the fourth quarter unless the company exceeds our base case forecast. In addition, our-base case forecast for EBITDA indicates the company will not be able to cover its interest payments for 2014 and 2015."
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