Iconix Brand Group Inc. Rating Lowered To #CC# From #CCC-# On Distressed Debt Outlook Negative

Stocks and Financial Services Press Releases Tuesday February 13, 2018 09:06
NEW YORK--13 Feb--S&P Global Ratings
NEW YORK (S&P Global Ratings) Feb. 12, 2018--S&P Global Ratings today lowered its corporate credit rating on New York-based Iconix Brand Group Inc. to 'CC' from 'CCC-'. The outlook is negative.
Our 'CCC+' issue-level and '1' recovery ratings on the senior secured bank loan are not affected.

The rating action follows Iconix's announcement that it has reached agreement with holders of the approximately $110 million principal amount of 1.5% convertible notes due in March 2018 (2018 convertible notes) to exchange them for an equal amount of new convertible notes due in August 2023 (new convertible notes) and cash payments representing accrued but unpaid interest on the 2018 convertible notes. We view the transaction as a distressed exchange tantamount to a default upon completion because we believe the 2018 convertible notes holders will receive less value than originally promised. This is because of the five-year maturity extension, the ability of Iconix to force conversion of the new convertible notes, and the substantial decline in potential equity conversion value. We also believe that absent the exchange, there would be an extremely high probability of a payment default and bankruptcy filing in the next month.

The negative outlook reflects the likelihood that we could lower our corporate credit rating on Iconix to 'SD' when the distressed exchange is completed.

Assuming the exchange occurs as planned and if Iconix fully repays the 2018 convertible notes by maturity, we will re-evaluate the ratings after further analyzing its pro forma cash flow generating ability, liquidity (including forecasted financial covenant compliance), and leverage. Based on our preliminary assessment, we will likely raise the corporate credit rating to the 'CCC' category.


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