Lands’ End Downgraded as It Faces Potential Trouble Refinancing $385 Million Loan

Lands’ End has been downgraded as its loan pressures intensify amid the coronavirus pandemic.

In a release on Friday, S&P Global Ratings lowered the Wisconsin-based retailer’s credit rating to “CCC” from “B-“. The agency attributed the downgrade to challenges that the chain could face in refinancing a $385 million term loan due in April, as its “ability to address the maturity at par depends upon favorable market and economic conditions.”

What’s more, S&P analysts put Lands’ End on CreditWatch, which reflects the potential for a downgrade or upgrade depending on the outcome of its term loan refinancing. The company did not provide specific details regarding its plan to refinance the loan during its preliminary first-quarter earnings call early this month.

“We believe as time to maturity evaporates, the likelihood increases of a refinancing that does not provide lenders with the original promise of the security,” the researchers wrote. “Given the maturity is now only about 10 months away, it is our view that Lands’ End may have insufficient time to absorb unforeseen negative developments and complete the refinancing at par.”

In its preliminary Q1 report released on June 2, Lands’ End posted a 17.3% decline in revenues to $217 million as its stores were shuttered from mid-March through the end of the quarter, or May 1. It also logged a net loss of $20.6 million, or a loss of 64 cents per diluted share, versus the prior year period’s net loss of $6.8 million, or loss of 21 cents a share.

However, the company reported that its e-commerce business — which accounts for about 75% of its total sales, with the other 25% representing its brick-and-mortar channel — rebounded in mid-April and accelerated into May, when it grew double-digits compared with the same period last year.

“While COVID-19 has created a complex environment on many fronts, we believe that our business model provides the flexibility to mitigate many of the challenges this has created across the industry,” president and CEO Jerome Griffith said in a statement at the time. “With our resilient e-commerce business and casual and value-oriented product assortment, combined with our lean operating structure and liquidity, we are positioned to capitalize on the opportunities ahead.”

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