S&P lowers Merrill

Standard & Poor's said it lowered its corporate credit rating on Merrill Corp. to B from B+ and its issue-level ratings on Merrill Communications LLC and placed these ratings on CreditWatch with negative implications.

The agency said the downgrade and CreditWatch listing reflect EBITDA declines over the past year (pro forma for acquisitions), resulting in a thin cushion under the company's bank covenants that could potentially lead to a covenant violation. The leverage covenant is 5.75 times for the quarter ended April and steps down to 5.5 times for the quarter ending July and to 5.25 times for the quarter ending January 2009.

In resolving the CreditWatch listing, S&P said it will consider the near-term operating prospects for the company, including restructuring actions that Merrill is taking across the organization.

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