S&P Lowers Sears Rating

New York City, Standard & Poor’s Ratings Services today lowered Sears, Roebuck and Co. ratings to speculative grade and off watch. The action follows the completion of Sears’ merger with Kmart Holding Corp. in a $12 billion transaction, and the creation of a new parent company, Sears Holdings Corp.

S&P lowered the long-term corporate credit rating from ‘BBB’ to ‘BB+.’ The short-term rating on Sears Roebuck Acceptance Corp. was lowered from ‘A-2’ to ‘B.’

According to S&P’s credit analyst Gerald Hirschberg, “The downgrade reflects an increase in business risk for the combined company, as both Sears and Kmart will continue to be challenged to improve store productivity and profitability.” Hirschberg went on to say that, while the merger represents a unique opportunity for Sears to accelerate its off-the-mall strategy by converting hundreds of Kmart stores to Sears stores, it likely will take a number of years before any reasonable assessment of the ultimate viability of the merger can be made.

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