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May Co.’s Debt Scrutinized By Standard & Poor’s

NEW YORK — Standard & Poor’s Ratings Services on Thursday placed May Department Stores Co. on CreditWatch with negative implications.<br><br>The action affects about $3.9 billion of the St. Louis, Mo.-based firm’s...

NEW YORK — Standard & Poor’s Ratings Services on Thursday placed May Department Stores Co. on CreditWatch with negative implications.

The action affects about $3.9 billion of the St. Louis, Mo.-based firm’s “A”-rated senior unsecured debt and “A-1”-rated commercial paper.

Gerald Hirschberg, an S&P analyst, wrote in his report that the firm “has suffered from intense competition; lagging consumer confidence; a poor economy; a rising unemployment rate that has pared disposable personal income, and the continuing impact world events are having on consumers’ appetites for spending.”

Profits declined for the third consecutive year in 2002 and were also down in the first quarter of fiscal 2003. Same-store sales fell by 8.8 percent in the quarter. Meanwhile, according to Hirschberg, the outlook for May and other moderately priced department stores remains “problematic” for the balance of 2003 because many of the same macroeconomic factors that hurt 2002 are unchanged.

“Although May has made a good effort to conserve cash by reducing share repurchases to minimal levels, the company has had difficulty in paring inventory levels due to the poor retail environment,” the analyst wrote.

May’s bank lines include $1 billion of unsecured revolving credit facilities. “In addition to its bank facilities, May has demonstrated good access to the long-term capital markets. Its maturity schedule is relatively light. It also maintains $525 million of shelf-registered securities for possible future offerings and has substantial unencumbered real estate assets,” S&P noted.