S&P downgrades DirectBuy corporate credit rating
Clint Engel -- Home Textiles Today, 9/14/2011 3:01:14 PM
Merrillville, Ind. - Standard & Poor's has lowered the corporate credit rating of DirectBuy Holdings here to CCC from B, saying the outlook is negative in the face of declining membership and ongoing legal issues.
The ratings agency also said it lowered the rating on DirectBuy's $335 million in senior secured debt to CCC- and revised down its "recovery rating," saying it expects modest recovery for lenders (10% to 30%) should the membership club default on the payment
DirectBuy ceo Scott Powell did not return a call from HTT sister publication Furniture Today for comment.
Founded as United Consumer Club, DirectBuy is a consumer buying service that boasts of 400,000 members on its website and says it offers more than one million products with no retail markup.
Instead, the company charges consumers membership fees reportedly in the $3,000 to $4,000 range for two- to three-year terms.
The S&P report said the DirectBuy has been experiencing monthly declines in membership levels since February 2010 because of the weak economy and labor market.
It also noted that DirectBuy is facing lawsuits alleging it misrepresented the cost of goods to members - something S&P said it believes has contributed to the membership decline and will hurt its performance going forward.
DirectBuy was acquired by private equity firm Trivest Partners in December 2007.
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