Co.'s 'financial flexibility is very limited,' S&P warns
HOLLYWOOD — Tower Records said Monday it’s seeking to restructure its debt to avoid falling into violation of loan covenants.
The revelation follows a downgrade of the Sacramento, Calif.-based music retailer’s debt ratings by Standard & Poor’s on Friday. That downgrade followed a similar move by Moody’s Investor Service in June and signals continuing woes among conventional record chains traceable in part to music discounting by Wal-Mart and other mass retailers.
“The outlook is negative,” S&P warned. “(Tower’s) financial flexibility is very limited.”
The ratings service projected Tower will lapse into violation of terms of its recently revised senior credit facility by October. However, Tower spokeswoman Louise Solomon said the company is in talks to restructure its debt obligations and is confident of averting any problems.
“We are completely on target with our current paydown schedule and are neither in default of our bank or bond covenants,” Tower said in a statement. “We are on track with the strategic initiatives we undertook and implemented, which have started to yield positive results, including significantly improved company performance.”