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Both J. Crew Group Inc. and Sears Holdings Corp. came under the scrutiny of debt analysts Monday.

This story first appeared in the December 6, 2011 issue of WWD.  Subscribe Today.

Standard & Poor’s cut the outlook on J. Crew’s debt to negative from stable, but held its corporate credit rating at “B,” which indicates that a company still has the capacity to meet its obligations. J. Crew was acquired by TPG Capital and Leonard Green & Partners in a leveraged buyout in March.

“Standard & Poor’s expects credit protection measures to remain thin despite J. Crew’s efforts to correct merchandising missteps this year,” the rating agency said. “These missteps are an example of fashion risk in the intensely competitive sector.…While we expect revenues to grow in the midsingle digits, we believe that the company will realize little to no margin improvement over the near term because of weak economic conditions and increased competitive pressures.”

Moody’s Investors Service cut Sears’ corporate family credit rating to “B1” from “Ba3.” Under Moody’s scale, the new rating signifies the company is subject to “high credit risk.”

Scott Tuhy, an analyst at the debt firm, said the downgrade “reflects persistent negative trends in revenues and operating margins of Sears Holdings, and the weaker-than-anticipated performance in its third-quarter earnings.” The firm, which operates the Sears and Kmart chains, posted losses of $421 million in the third quarter.