The percentage of U.S. retailers with high-risk CCC ratings has doubled since the beginning of the year, according to a new report by S&P.
Eighteen percent of U.S. retail ratings are in the CCC range, as the industry continues to grapple with increased competition, changing shopping patterns and steep discounts to attract shoppers. A CCC rating indicates that an obligation is vulnerable to nonpayment, and that the ability to pay the obligation could hinge on whether business conditions are favorable.
The bankruptcy filing of iconic Toys R Us last month, which took many insiders by surprise, further spooked an already rattled industry.
BCBG, Radioshack and Payless Shoesource are among the many retailers that have also filed for bankruptcy this year.
Along with the restaurant industry, retail and restaurants comprise the most distressed industry in the U.S., with roughly 21 percent of retail and restaurant companies now viewed as distressed by the S&P.
As peers face downgraded ratings, retailers’ attempts to refinance debt and avoid bankruptcy may be challenged, warns the credit ratings agency.
Among those with upcoming maturities are Guitar Center, which Moody’s recently downgraded on risk of refinancing its maturities. The company is currently working with advisors to address its $1.3 billion debt burden.
Names on the S&P’s CCC credit list include The Neiman Marcus Group and Bi-Lo Finance, the owner of supermarket chain Winn-Dixie Stores.
Challenging debt conditions for retailers are also having ramifications on the equity market, as lenders have become skittish financing attempts to take retailers private.