Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of cemetery-services company StoneMor Partners
So what: In a press release following the close of trading yesterday, Standard & Poor's put StoneMor's credit rating on a negative watch, sparking concerns that it would be downgraded to below its current B level. At the same time, S&P downgraded the unsecured debt of StoneMor's subsidiary from B- to CCC+.
Now what: While both the company's credit rating and the rating on the subsidiary's notes were already well below investment grade, lower ratings are not a happy outcome for a company whose stated EBITDA -- a cash-flow measure -- is already barely covering its interest commitments.
Looking ahead, investors will want to see the company make progress toward improving its balance sheet and stabilizing its financing. If ratings agencies and bond investors continue to bite their nails over StoneMor's financial stability, yesterday's warning could become a downgrade, which could put the company in an even tougher financial position.
Of course, as my fellow Fool Alex Pape outlined back in August, there may be more than meets the eye when it comes to StoneMor's financials, so the S&P's take may not be quite as bad as it seems at first blush.
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Fool contributor Matt Koppenheffer has no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter, @KoppTheFool, or on Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.