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TORONTO (Reuters) - Canadian toymaker MEGA Brands said on Wednesday its quarterly loss narrowed as sales increased, but Standard & Poor's downgraded its debt and said a recapitalization this week was tantamount to a debt default.
The Montreal-based company lost $22.1 million, or 60 cents a share for the fourth quarter that ended December 31, compared with a loss of $323.3 million, or $8.83 a share, for the same time a year earlier.
Its stock fell 3.0 percent to 48.5 Canadian cents.
Soon before the market closed, S&P ratings service said it was lowering the long-term corporate credit rating on MEGA Brands Inc. to 'D' (default) from 'CC'.
"The downgrade and withdrawal follow the completion of the company's recapitalization transaction on March 30, which included the repayment of debt below par," said Standard & Poor's credit analyst Lori Harris.
"Under Standard & Poor's criteria, we view an exchange offer at a discount by a company under substantial financial pressure as a distressed debt exchange and tantamount to a default," S&P said in a statement.
S&P also said it was withdrawing all ratings on MEGA Brands and its subsidiaries.
It lowered the issue-level rating on the company's and its subsidiaries' senior secured bank debt to 'D' from 'C'.
MEGA Brands said net sales increased 6 percent to C$107.3 million, compared to C$101 million in year-earlier period for the first increase in year-over-year net sales since the first quarter of 2007.
Also this week, Fairfax Financial Holdings Ltd said it acquired a 19.7 percent share of the company.
Reporting by Scott Anderson and Pav Jordan, editing by Maureen Bavdek and Janet Guttsman