S&P cuts rating on Sycamore’s Nine West

  • Debt exchange seen in the next year for Sycamore portfolio company
  • Nine West now headed up by exec from Alvarez & Marsal
  • Adjusted debt-to-EBITDA at about 20x


Retailer Nine West Holdings Inc faces an unsustainable capital structure and may pursue a debt exchange in the next year, S&P Global Ratings said in a recent downgrade of the portfolio company controlled by Sycamore Partners.

Hit by restructuring initiatives, operational missteps and a weak retail environment, Nine West, the footwear and accessories retailer, has been generating negative funds from operations, the debt-research firm said.

S&P issued a negative outlook on the likelihood the company will seek a debt restructuring or exchange over the next year.

“We previously expected the company would improve its revenue and EBITDA margin in 2016,” Suyun Qu, an analyst at S&P, said in a note. “However, slow growth amid a still challenged retail environment has provided very little room to meaningfully improve the company’s operating performance and cash flow generation.”

S&P expects a weak performance from the company in 2016, with an adjusted debt-to-EBITDA multiple at a “very high” 20x EBITDA.

On the plus side, S&P sees adequate liquidity at Nine West. The company’s borrowing base will allow it to access its asset-backed loan.

S&P cut its corporate rating on Nine West to CCC from CCC+. A CCC rating means the company’s debt is currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments. The ratings firm also cut its ratings on the company’s first-lien secured debt, senior unsecured term loan and senior unsecured notes.

A spokesman for Sycamore declined to comment.

Sycamore Partners purchased Nine West in early 2014 as part of its $2.2 billion take-private of Jones Group.

In April 2014, it broke up its acquisition of Jones Group into independent companies including Nine West, Jones New York, Kasper Group and Stuart Weitzman. The firm named Peggy Eskanasi, a former Kohl’s executive, to head Nine West. She worked at Nine West until May, according to her LinkedIn profile.

Ralph Schipani, a managing director at turnaround specialist Alvarez & Marsal, now leads Nine West for Sycamore, a spokesman for the firm said.

Last August, Nine West bought Sherson Group Inc, which held the exclusive rights to the Nine West, Anne Klein and Easy Spirit brands in Canada.

Action Item: Nine West, http://www.ninewest.com/

Shoppers sit with bags in London on August 25, 2016. REUTERS/Neil Hall