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S&P downgrades Stearns Holdings, expects distressed exchange of debt

S&P Global Ratings downgraded mortgage broker Stearns Holdings LLC's long-term issuer credit rating to CCC+ from B-.

The outlook of the rating is negative.

S&P Global Ratings cited Stearns Holdings's "unsustainable" leverage, as adjusted EBITDA turned negative during the first nine months of 2018 due in part to falling originations in the industry and shrinking gain-on-sale margins.

The agency's action comes after a noteholder of the senior secured notes declined the company's proposal to extend the maturity by two years and an option to pay-in-kind two coupon payments. This raised the chances of the company undertaking a distressed exchange of its notes before they mature in August 2020, S&P Global Ratings said.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.