S&P Downgrades Quicksilver (ZQK) to 'D' Following Ch. 11 Filing

Standard & Poor's Ratings Services lowered its corporate credit rating on Quicksilver (NYSE: ZQK) to 'D' from 'CCC+'.

At the same time, we lowered our issue-level rating on the company's €200 million senior unsecured notes due 2017 to 'D' from 'CCC+' and revised the recovery rating to '5' from '4', indicating our expectation of modest recovery (at the low end of the 10%-30% range) in the event of a payment default. We also lowered our issue-level rating on the company's $280 million senior secured notes due 2018 to 'D' from 'CCC', but left the recovery rating unchanged at '5'. In addition, we lowered the issue-level rating on the company's $225 million senior unsecured notes due 2020 to 'D' from 'CCC-', leaving the recovery rating unchanged at '6', indicating our expectation of negligible recovery (0%-10%) in the event of a payment default.

The rating actions follow Quiksilver's announcement that it filed a voluntary petition to implement a pre-negotiated restructuring of its debt obligations under Chapter 11 of the U.S. Bankruptcy Code.

"Quiksilver's operating performance has been poor over the past couple of years, with execution issues in North America and foreign exchange headwinds overseas leading to declining cash flow and weaker credit metrics," said Standard & Poor's credit analyst Peter Deluca. "Compounding this weakness is what we view as a narrow brand portfolio in a low-margin apparel and accessories niche that is susceptible to changing consumer tastes."

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