Moody’s changes Claire’s PDR to Caa3-PD/LD

Moody's Investors Service said that Claire's Stores, Inc.'s disclosure via its recent 10-Q filing that its sponsor/owner, affiliates of Apollo Management, had in May 2016 purchased Claire's subordinated notes through the open market and exchanged about $175 million of these notes for subordinated PIK due 2017, is viewed as a distressed exchange.

As a result, the agency appended Claire's probability of default rating with the /LD (limited default) designation to Caa3-PD/LD from Caa3-PD.

Moody's said it believes the transaction was executed due to the company’s inability to fully service quarterly interest expense, and therefore constitutes a distressed exchange under Moody's definition of default. This policy is intended to capture events whereby issuers fail to meet debt service obligations outlined in its original debt agreements.

Moody's will remove the /LD designation from Claire's probability of default rating after three days. These transactions do not constitute an event of default under any of the company's debt agreements.

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