S&P Global Ratings lowered its debt rating on Belk Inc. due to the Charlotte, N.C.-based department store operator’s announcement that it intends to restructure its debt. S&P views the proposed transaction as distressed and representing less than the original promise of its term loans.The ratings agency lowered its issuer credit rating on Belk to ‘CC’ from ‘CCC’ and its issue-level rating on its first-lien term loan to ‘CC’ from ‘CCC’.S&P also has a negative outlook on Belk, reflecting its expectation that it will lower its issuer credit rating on Belk to ‘SD’ (selective default), or ‘D’, in the event of a missed interest payment or the completion of the transaction.

S&P wrote, “Its proposal includes reducing overall funded debt by about $450 million, while simultaneously infusing an additional $225 million of new capital into the business from some of its lenders and its private equity sponsor, Sycamore Partners LLP. If completed, we would view the proposed transaction as tantamount to default because lenders will receive less than they were originally promised. Additionally, we believe the company will likely miss its next quarterly interest payment on its second-lien term loan of approximately $14 million, due February 1. We think the rapid performance deterioration amid the coronavirus pandemic has further weakened Belk’s liquidity position and led to this juncture.”