Carter Hawley Debt Put on ‘Creditwatch’ by S

Standard & Poor’s, one of the nation’s largest debt-rating services, said Friday that it has placed about $525 million in Carter Hawley Hale Stores debt on its “Credit-watch with negative implications.”

The service cited the Los Angeles-based retailer’s $48 million in 1985 operating earnings, which S&P; said was “well below S&P; expectations.”

Carter Hawley issued a terse statement: “We disagree with S&P;’s expressed views.”

As further evidence of the difficult environment for retailers, the service also placed more than $500 million of K mart’s debt on Credit-watch.

The service did not lower Carter Hawley’s senior debt rating from BBB-, where it has stood since August, 1984. An S&P; spokesman said a decision on whether to reduce a rating normally is made within 90 days.

“We want to give them as much opportunity as reasonable to present a case to us,” he said.

The rating was reduced from BBB in 1984 to reflect “a serious impairment to the balance sheet” relating to Carter Hawley’s successful, but costly, defense against a hostile takeover bid by the Limited. S&P; said it expected “operational improvements to reverse a history of mediocre profitability.”

However, S&P; said, “it now appears that Carter’s various retail businesses do not have the fundamental strengths necessary to achieve this turnaround, especially in a competitive retailing environment.”

Since BBB- is the service’s lowest rating in the investment grade category, anything lower would be considered a speculative rating, the spokesman said.

David Jackson, an analyst at Morgan, Olmstead, Kennedy & Gardner, acknowledged that both the company and analysts had expected Carter Hawley to achieve its turnaround by now, but he said the S&P; action “is way off base.”