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S&P Downgrades BCBG

Standard & Poor’s Ratings Services lowered BCBG Max Azria Group's credit one tick to "CCC-plus."

Standard & Poor’s Ratings Services on Wednesday lowered its corporate credit rating on BCBG Max Azria Group Inc., citing its “continued weak operating performance in the fourth quarter.”

The rating, previously “B-minus,” was lowered one tick to “CCC-plus.” Obligations in the CCC family are said to be “vulnerable to nonpayment and…dependent upon favorable business, financial and economic conditions.” CCC is the third level down from the line separating investment from speculative grade debt. BCBG’s outlook remained negative.

S&P credit analyst Jackie Oberoi said BCBG’s poor fourth-quarter performance led to expectations of “very limited [earnings before interest, taxes, depreciation and amortization] cushion over BCBG’s financial covenant” and a continuation of weakness in the new year. S&P also expressed concern over the company’s ability to meet its minimum EBITDA covenant for Max Rave, total control of which was acquired in 2006, but said “this does not constitute an immediate event of default but could prove distracting for management.”

Calls to Vernon, Calif.-based BCBG weren’t returned. The company is privately held and controlled by Max Azria, founder and chief executive officer.

BCBG’s corporate credit rating was lowered to “CCC” from “B-minus” in June, but the company said at the time that the downgrade was because the end of its fiscal year changed to January from December. S&P restored the “B-minus” rating following completion of its audit.