Mattel’s Debt Rating Cut

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Mattel Inc.’s debt rating was cut Thursday by Standard & Poor’s Ratings Services as sales of Barbie products, the toymaker’s largest and most profitable product line, continue to decline.


The El Segundo-based company’s credit rating was cut to the lowest level of investment grade of “BBB-” from “BBB,” S & P; said. Mattel had total debt of $625 million as of Dec. 31.


“The action is based on Standard & Poor’s concerns about the company’s business fundamentals and declining profitability, which outweigh the company’s moderate debt leverage and good liquidity,” said S & P; credit analyst Hal F. Diamond in a statement.


Mattel’s business risk is increasing as a result of the continued decline in sales of Barbie due to its loss of market share to rival fashion doll Bratz, made by MGA Entertainment Inc. The report said S & P; is concerned that the Barbie product line may be less relevant to girls’ interests today and that it may continue to face heavy competition from the Bratz line.


Meanwhile, S & P; affirmed the “A-3” short-term credit rating on the company. S & P; also removed Mattel’s rating from CreditWatch, where it was placed with negative implications on Nov. 18. The rating outlook is now stable.


Mattel’s most recent fourth quarter displayed weakness in its Barbie brand, with global sales of Barbie dropping 11 percent. The company’s fourth-quarter profit fell 1.8 percent to $279.2 million (69 cents per share) from a year ago, while sales dipped half a percent to $1.84 billion.

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