Sears shares plunged on Friday after recent moves to change the terms of a loan led to a drop in its already sliding credit rating.
The stock price for the once iconic but now beleaguered retailer fell 9.17%, to $2.53 a share Friday afternoon, following a report from S&P Global Ratings that it was lowering the company’s credit rating to CC from CCC-, with a warning that the score could drop even further.
Sears, which has borrowed millions of dollars, closed dozens of stores and sold off one of its signature brands to stem its steep financial losses recently announced that it was seeking to exchange some of its secured and unsecured notes in order to change the terms of a loan agreement.
Sears raised $100 million in new funding and forecast a smaller loss in the fourth quarter, sending its shares higher.
“We would treat the proposed transactions, if completed, as tantamount to a default,” S&P Global Ratings said in a note, adding that its outlook for the retailer was negative. “The negative outlook reflects our expectation that, if the proposed transactions are completed, we will lower the corporate credit rating to ‘SD’ (selective default) and the issue-level ratings on the affected debt facilities to ‘D.’ “
Sears is closing another 103 stores and most will close by April.