S&P downgrades Cash Store

Standard & Poor's said it lowered the rating on the Cash Store Financial Services Inc. to CCC+ from B-, along with the company's senior secured notes to CCC+ from B-.

The 4 recovery rating on the senior secured notes, which indicates 30% to 50% expected default recovery, is unchanged.

The outlook is negative.

The downgrades follow a proposal by the payday loan registrar in Ontario to revoke Cash Store's payday lending licenses, S&P said.

The downgrades also follow news that Cash Store has discontinued its payday loan product in the region, said Igor Koyfman, an S&P analyst.

The company's businesses in Ontario, which account for about one-third of its store count, will begin offering a new line of credit product to its customers, the analyst said.

S&P said it believes this is to offset the loss of its payday lending product; however, this is a relatively new product.

And it may be challenging for the company to replace its lost earnings from the payday loan product, the agency said.

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