S&P turns Shutterfly view to negative

S&P said it revised its outlook for Photo Holdings LLC (Shutterfly Inc.) to negative from stable and affirmed all its ratings, including the B- ratings on its bank loans.

The agency cited inflation hurting discretionary consumer spending and the effect of rising interest rates on Shutterfly’s debt, 60% of which is floating rate.

“Given that monetary policy affects economic activity with a lag, we expect the full impact of cumulative rate hikes to be felt in 2023. We expect the Fed to hold rates steady until the first rate cut in third-quarter 2024 as the Fed waits for inflation to near the 2% target, which will occur in second-quarter 2024. As a result of a higher Libor base rate on Shutterfly's debt, we project that interest expense could exceed $200 million in 2023 compared with our original forecast of about $180 million,” S&P said in a press release.

The combination of lower consumer spending and higher interest rates could lead to a lower rating, the agency warned.

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