OREANDA-NEWS. S&P Global Ratings today assigned its 'B' issue-level rating and '3' recovery rating to Hudson, Oh.-based fabrics and crafts retailer Jo-Ann Stores Holdings Inc. subsidiary Jo-Ann Stores LLC.'s $850 million first-lien term loan. The '3' recovery rating indicates our expectation that lenders would receive meaningful recovery (lower half of the range 50% to 70% range) of their principal in the event of a payment default. This follows a leverage-neutral refinancing to upsize the company's asset-based lending (ABL) revolving credit facility and term loan B, with proceeds going to repay all borrowings under the existing ABL and term loan. The company will use the remaining amount to repay a majority of the $450 million unsecured notes. All other ratings, including the 'B' corporate credit rating and negative outlook on the company are unchanged.

The negative outlook on Jo-Ann Stores reflects our expectation for leverage to remain in the mid - to high-5x range over the next 12 months as the company continues to contend with soft operating performance trends. Despite EBITDA gains over the latest 12 months, the company has experienced declining same-store sales more recently because of increased competition, and we remain cautious about its ability to reverse those trends in the coming year. Overall, we expect earnings growth to be flat as improved expense management partially offsets negative sales trends. Jo-Ann Stores continues to maintain adequate liquidity, supported by positive free operating cash flow and access to a recently upsized $400 million ABL revolving credit facility.