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Debenhams, New Look downgraded by Moody's

Published
today Jan 17, 2019
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Credit ratings agency Moody’s has downgraded Debenhams’ credit rating from ‘stable’ to ‘negative’, warning financial creditors of possible losses amid tough times at the department store chain.


Debenhams


Shares in the company fell 7% on Thursday morning after the announcement.

This is another blow to the troubled British retailer following the shock departure of CEO Sergio Bucher and chairman Sir Ian Cheshire at the company’s AGM last week as a result of a boardroom coup led by shareholder Mike Ashley.

It came after after a 3.4% fall in like-for-like sales at the chain over the key festive period.

Debenhams has net debts of £320m and is understood to be in talks with its lenders about refinancing its current loan facilities before they expire next year.

Moody's vice president and lead analyst for Debenhams, David Beadle, said: "Today's change in outlook reflects our view that there is a risk that refinancing negotiations may not result in a timely and cost effective solution and thus the process could ultimately culminate in losses for financial creditors."

“However, notwithstanding this and the company's elevated leverage we continue to view Debenhams liquidity profile as adequate for the time being,” he added.

NEW LOOK ALSO GETS A DOWNGRADE

High street chain New Look’s senior secured notes rating was also downgraded by Moody’s on Thursday. Reflecting concerns over the chain’s new restructuring deal, unveiled this week, Moody’s downgraded New Look’s long-term credit rating from Caa3 to a C - the lowest rating.

Roberto Pozzi, Moody’s lead analyst for New Look, said: “We’ve downgraded New Look's instrument ratings to reflect the proximity to a distressed exchange, which constitutes a default under our methodologies, and the higher-than-expected losses for financial creditors if the company's proposed debt restructuring plan is successfully implemented.”

The company said the downgrade also reflected New Look’s ongoing decline in sales and cash flows.

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