Community Choice Financial Inc. Downgraded To 'CC' On Proposed Notes Restructuring; Outlook Is Negative
17-Apr-2018 20:17 BST
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Community Choice Financial Inc. has engaged advisers as it makes
proposals to restructure its senior secured notes due 2019 and 2020,
which, if completed, we would likely view as a selective default.
As a result, we are lowering our issuer credit rating on the company and
our issue-level ratings on the company's senior secured notes to 'CC'
from 'CCC'. The recovery rating on the notes remains '4'.
The rating outlook is negative, reflecting the expectation that we will
likely lower the issuer credit rating to 'SD' (selective default) once
the transaction is completed.
NEW YORK (S&P Global Ratings) April 17, 2018--S&P Global Ratings said today it
lowered its issuer credit rating on Community Choice Financial Inc. (CCFI) to
'CC' from 'CCC'. The outlook is negative.
At the same time, we lowered our issue-level rating on the company's senior
secured notes to 'CC' from 'CCC'. The recovery rating on the notes remains '4'
reflecting our expectations for average recovery (30%-50%; rounded estimate:
35%) in the event of a default.
The downgrade follows the company's amended revolver and subsidiary note
payable on March 30, 2018--both of which require CCFI to make a proposal to
restructure its senior secured notes, which, if completed, we would likely
view as a selective default.
We would likely view this transaction as a distressed exchange, because we
expect participating noteholders will receive less than the original amount
promised, further demonstrated by the notes' recent decline in price to
roughly 65 cents on the dollar and the company's negative EBITDA in 2017.
The negative outlook reflects our expectation over the next six months that
CCFI will likely selectively default on its senior secured notes due 2019 and
2020 following the company's amendment to a revolver and subsidiary note
payable that requires the company to submit a plan to renegotiate the senior
secured notes.
If we lower the issuer credit rating to 'SD', we will evaluate the company's
new capital structure and viability of a path to return to profitability
following the distressed exchange.
