Ratings agency Standard & Poor’s on Friday downgraded the corporate credit rating of BCBG Max Azria Group to “CCC+” from “B-” based on the possibility of a covenant violation.

The agency said the potential covenant violation is due to a “meaningful revenue decline, as the company exited the mass market earlier than expected in 2011.” S&P said it was also lowering the issue-level rating on BCBG’s $230 million term loan to “CCC+” from “B-” — although it left the “3” recovery rating unchanged.

S&P said there could be a further downgrade if BCBG violates its covenants or if it appears unlikely to receive a covenant amendment.

Helena Song, S&P credit analyst, said that the ratings reflect an expectation that “weaker than previously expected operating performance could potentially trigger a financial covenant violation, when it becomes applicable for the fourth quarter of fiscal 2011.”

S&P said the sources of BCBG’s liquidity is primarily from its “modest cash balance and availability under the asset-based loan revolver.” S&P noted that the outlook is developing.

S&P also pointed out that it could raise the ratings if “liquidity improves and operating performance and the revenue base continue to stabilize.”

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