March 14 - Overview -- Penson Worldwide Inc. has commenced a debt restructuring plan, which we deem a distressed exchange. -- As a result, we are lowering our issuer credit and issue ratings on Penson to 'CC' and removed the ratings from CreditWatch negative. -- The rating outlook is negative. -- When the company completes the debt restructuring, we expect to lower the ratings further. Rating Action On March 14, 2012, Standard & Poor's Ratings Services lowered its long-term counterparty credit rating on Penson Worldwide Inc. to 'CC' from 'B-' and removed the ratings from CreditWatch Negative. The outlook is negative. At the same time, Standard & Poor's lowered its rating on Penson's $200 million senior secured second-lien notes to 'CC' from 'CCC+' and removed the rating from CreditWatch negative. Rationale The downgrade reflects the company's announcement that it is launching a debt restructuring effort to help alleviate its heavy debt and debt service burden. Penson's plans to exchange the rated $200 million 12.5% second-lien notes due 2017 for $100 million 12.5% first-lien payment-in-kind (PIK) notes due 2017 and $100 million 12.5% preferred PIK shares redeemable in 2017. Penson also plans to exchange its $60 million senior convertible notes into new PIK notes and 51.6% ownership of the company, and to convert its seller financing note with Broadridge Financial Solutions Inc. into a 9.9% ownership of Penson. The downgrade also reflect our view that, based on our criteria, the shift into PIK on the rated debt means that the existing debtholders will receive less than originally promised. Outlook The outlook is negative. When and if the debt exchange is complete, we will lower our long-term counterparty credit rating on Penson to 'SD' (selective default) and lower our rating on its $200 million senior secured second-lien notes to 'D'. The negative outlook also incorporates our belief that the fundamental prospects for the company's business will not materially improve in the near term. We expect that even with the elimination of its cash interest obligations the firm will continue experiencing operating losses for at least the next few quarters because of low interest rates and transaction volumes. Once the exchange offer in completed, the company will lower its debt burden and eliminate its cash interest obligations. Shortly thereafter, we will reassess the company's creditworthiness and adjust the ratings to what we deem appropriate under the new debt conditions; most likely no higher than a low single 'B' rating. Related Criteria And Research -- Rating Implications Of Exchange Offers And Similar Restructurings, Update, May 12, 2009 -- Rating Securities Companies, June 9, 2004 Ratings List Downgraded; CreditWatch/Outlook Action To From Penson Worldwide Inc. Counterparty Credit Rating CC/Negative/-- B-/Watch Neg/-- Penson Worldwide Inc. Senior Secured (1 issue) CC CCC+/Watch Neg Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.