Time (TIME) Downgraded to 'BB-' by S&P; Outlook is Stable

S&P Global Ratings said it lowered its corporate credit rating on Time Inc. (NYSE: TIME) to 'BB-' from 'BB'. The outlook is stable.

At the same time, we lowered the issue-level rating on the company's senior secured credit facility to 'BB+' from 'BBB-'. The recovery rating on this debt remains '1', indicating our expectation for very high (90% to 100%) recovery in the event of a payment default. We also lowered the issue-level rating on its senior unsecured notes to 'BB-' from 'BB'. The recovery rating on this debt remains '3', indicating our expectation for meaningful (50% to 70%; lower half of the range) recovery in the event of a payment default.

"The ratings downgrade reflects our more cautious view of Time Inc.'s ability to deleverage and its business transformation given our belief that secular pressures the magazine industry faces will intensify as consumer preferences shift to digital media from print media," said S&P Global Ratings credit analyst Minesh Patel.

More specifically, the downgrade reflects the revision of our financial risk assessment to significant from intermediate based on our cash flow volatility adjustment. Although we expect adjusted leverage will decline to just within our 2x-3x rating threshold range over the next two years, the volatility adjustment incorporates a cushion of medium-term variance because of stress scenarios not factored into our base-case forecast. Stress scenarios include a recessionary economic environment, greater-than-expected technology or competitive shifts, or material business transformation execution missteps.

Our stable outlook reflects our view that the company will continue to scale and extend its brand online while stabilizing ad revenues. It assumes that adjusted leverage will decline to the high-2x area over the next two years and that liquidity will remain strong.

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