S&P downgrades iPayment

Standard & Poor's said it lowered the corporate credit rating on iPayment Inc. to B- from B.

The agency also said it lowered the rating on the company's first-lien term loan and revolving credit facility to B from B+. The 2 recovery rating, which remains unchanged, indicates 70% to 90% expected default recovery.

S&P also said it lowered the ratings on iPayment's senior unsecured notes due 2018 and iPayment Holdings Inc.'s paid-in-kind notes due 2018 to CCC from CCC+. The 6 recovery rating, which remains unchanged, indicates 0% to 10% expected default recovery.

The outlook is negative.

The downgrade reflects the company's weak competitive position, client attrition, reduced profitability and an expectation for leverage to be sustained at more than 8x over the coming year, said John Moore, an S&P analyst.

The negative outlook reflects the company's business challenges to stabilize its profitability and to maintain adequate headroom under the financial maintenance covenants of its credit facility over the coming year, Moore said in a press release.

The ratings also consider iPayment's reliance on an independent sales channel and its focus on small- and mid-sized merchant customers, Moore added.

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