Standard & Poor’s lowered its issuer credit rating on Academy Sports to ‘SD’ (selective default) from ‘CCC+’ and the issue-level ratings on the term loan facility to ‘D’ from ‘CCC+’ due to the retailer’s repurchase of debt.

The rating agency described the transactions as a “de facto partial restructuring” but also said it was likely to raise the ratings on “New Academy” and its debt back to the ‘CCC’ category in the coming days to reflect the risk of a conventional default.

In a press release, the ratings agency noted that Academy recently repurchased an additional $54.4 million of principal of its senior secured term loan facility due in 2022 at approximately 30 percent lower than par through open market transactions.

“The downgrade follows New Academy’s disclosure that it repurchased an incremental $54.4 million of its senior secured term loan facility principal due in July 2022 during the first quarter of its fiscal 2019, following previous disclosure of repurchasing about $89 million in the quarter,” S&P wrote. “We view the repurchase as distressed, given our view of the company’s weak credit profile, and the recurring nature of the open market transactions as not completely anonymous. This contributes to our determination that the transactions constitute a distressed exchange. In total, nearly 10 percent of the original issue amount has been acquired at less than par. Funding for the first-quarter debt repurchases was composed of borrowings under the asset-based lending (ABL) facility and about $54 million cash on hand.”