Standard & Poor’s Ratings Services has lowered its long-term corporate credit rating on South Africa-based nonfood retailer Edcon Holdings to ‘SD’ (selective default) from ‘CC’.
It added that it had lowered the issue rating on Edcon’s 425 million senior unsecured notes due 2019 to ‘D’ from ‘C’.
“The recovery rating on the senior unsecured notes is ‘6’‚ reflecting our expectation of negligible (0% to 10%) recovery in the event of a conventional default.
“We have also lowered to ‘CC’ from ‘CCC-’ our issue rating on the group’s 617 million and $250 million senior secured notes. We removed the rating from CreditWatch with negative implications‚ where we had placed them on July 2‚ 2015. We revised the recovery rating on these notes to ‘3’ from ‘2’‚ indicating our expectation of meaningful (50%-70%) recovery in the event of a payment default‚” the global rating agency said in a statement.
The downgrade follows the conclusion of Edcon’s exchange offer with respect to its 425 million 13.375% senior unsecured notes due 2019.
“We understand that the holders of approximately 97.3% of the notes (amounting to 413.7 million) have tendered their notes for settlement. Of those holders of Edcon’s senior notes that participated in the exchange offer‚ 45.3% of the notes selected Option A and 54.7% selected Option B‚ which will include an equity exposure.
“Accordingly‚ Edcon Holdings Ltd. has issued 200‚060‚360 in aggregate principal of new Option A senior 13.375% payment-in-kind (PIK) notes and 241‚304‚705 in aggregate principal amount of new Option B senior 13.375% PIK
notes. Additionally‚ Edcon Ltd. issued 21‚663‚779 in aggregate principal of new super senior 8% PIK notes as early consent consideration.
“We note that‚ under the terms of the exchange offer‚ the second leg of the two-step exchange of securities remains to be completed and will likely occur in November 2015. We expect to review the corporate credit and issue-level
ratings after the completion of final stage of the exchange offer‚ when we will have a clearer view of the group’s capital structure. Following the final completion and conversion we anticipate that the group will likely benefit
somewhat from lower total debt.
“Furthermore‚ Edcon’s net cash interest payment obligations will also likely decrease by more than 1 billion South African rand (72 million) a year‚” S& P said.
Edcon downgraded to 'SD' on concluded exchange offer
Standard & Poor’s Ratings Services has lowered its long-term corporate credit rating on South Africa-based nonfood retailer Edcon Holdings to ‘SD’ (selective default) from ‘CC’.
It added that it had lowered the issue rating on Edcon’s 425 million senior unsecured notes due 2019 to ‘D’ from ‘C’.
“The recovery rating on the senior unsecured notes is ‘6’‚ reflecting our expectation of negligible (0% to 10%) recovery in the event of a conventional default.
“We have also lowered to ‘CC’ from ‘CCC-’ our issue rating on the group’s 617 million and $250 million senior secured notes. We removed the rating from CreditWatch with negative implications‚ where we had placed them on July 2‚ 2015. We revised the recovery rating on these notes to ‘3’ from ‘2’‚ indicating our expectation of meaningful (50%-70%) recovery in the event of a payment default‚” the global rating agency said in a statement.
The downgrade follows the conclusion of Edcon’s exchange offer with respect to its 425 million 13.375% senior unsecured notes due 2019.
“We understand that the holders of approximately 97.3% of the notes (amounting to 413.7 million) have tendered their notes for settlement. Of those holders of Edcon’s senior notes that participated in the exchange offer‚ 45.3% of the notes selected Option A and 54.7% selected Option B‚ which will include an equity exposure.
“Accordingly‚ Edcon Holdings Ltd. has issued 200‚060‚360 in aggregate principal of new Option A senior 13.375% payment-in-kind (PIK) notes and 241‚304‚705 in aggregate principal amount of new Option B senior 13.375% PIK
notes. Additionally‚ Edcon Ltd. issued 21‚663‚779 in aggregate principal of new super senior 8% PIK notes as early consent consideration.
“We note that‚ under the terms of the exchange offer‚ the second leg of the two-step exchange of securities remains to be completed and will likely occur in November 2015. We expect to review the corporate credit and issue-level
ratings after the completion of final stage of the exchange offer‚ when we will have a clearer view of the group’s capital structure. Following the final completion and conversion we anticipate that the group will likely benefit
somewhat from lower total debt.
“Furthermore‚ Edcon’s net cash interest payment obligations will also likely decrease by more than 1 billion South African rand (72 million) a year‚” S& P said.
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