Street Calls of the Week
Investing.com -- S&P Global Ratings has downgraded QVC Group Inc. to ’CCC’ from a previous rating, citing increased refinancing risk, and assigned a negative outlook to the company.
The rating agency pointed to elevated risk that QVC will pursue a debt exchange that would be viewed as distressed ahead of an upcoming maturity. As of August 1, QVC drew $975 million on its revolving credit facility (RCF), which is due in October 2026. The revolver now has approximately $200 million of availability with a total of $2.9 billion drawn.
S&P noted that earlier this year, QVC removed the Cornerstone entity as a guarantor on its RCF. While Cornerstone represents a small portion of the company’s overall revenue, S&P views these actions as likely preparation for a debt exchange or balance sheet restructuring that could be considered tantamount to default.
Following the revolver draw, QVC’s cash balance stands at $1.87 billion, which S&P believes is insufficient to cover the facility when it matures in October 2026, especially considering the company’s weak cash flow generation. The rating agency expressed concern about QVC’s ability to refinance the revolver on satisfactory terms due to continued weak performance and negative free operating cash flow.
Adding to refinancing concerns, the debt is trading at 60 cents on the dollar, which could facilitate a distressed exchange. S&P also pointed to QVC’s complex capital structure as an additional pressure on liquidity.
S&P revised QVC’s business risk profile to "vulnerable" from "weak" due to the secular decline in its business operations. This decline stems from falling TV viewership as customers switch to streaming services and social media applications.
In the second quarter of 2025, QVC reported a 7% year-over-year decrease in revenues to $2.2 billion, attributed to weaker consumer sentiment, a volatile news cycle, and further cost pressures from potential tariffs. Despite the company implementing strategic initiatives, S&P believes it will take time to see positive effects. The rating agency forecasts revenues will continue to decline 8.3% in 2025.
The negative outlook reflects the possibility of further rating downgrades if a default scenario appears inevitable in the next six months or if the company announces a debt exchange offer viewed as tantamount to default.
S&P indicated it could lower the rating if QVC is unable to refinance its revolver, if continued weak operating performance and negative free cash flow leads to a liquidity event, or if the company announces a debt restructuring that provides investors with less than originally promised.
A positive rating action could occur if QVC successfully extends the maturity of its revolver on satisfactory terms and if operating performance improves to alleviate near-term liquidity pressures.
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