17th Apr 2019 18:15
LONDON (Alliance News) - Moody's Investors Service on Wednesday has downgraded the long-term issuer rating of Next PLC to Baa3 from Baa2, with stable outlook.
Meanwhile, Moody's assigned a Baa2 long-term issuer rating to Next subsidiary, Next Group PLC, and its senior unsecured notes, including the proposed GBP250 million issuance announced
on Thursday last week.
Moody's explained that the ratings actions follow a capital reorganisation and a debt substitution, completed earlier this year, under which Next Group replaced its parent as the issuer of existing notes. As the overall credit quality of the business was unchanged by this reorganisation, Moody's said, a Baa2 rating is "appropriate" for Next Group.
However, the ratings agency noted that the creation of structural subordination for any creditors of Next leads to the one notch downgrade of that company's long-term rating.
Moody's noted that Next's performance in its financial 2019, which ended on January 26, as well as its guidance for the new financial year, is in line with Moody's expectations.
Therefore, the stable outlook reflects the ratings agency's estimates that Next will remain well-positioned in its rating category despite flat operating performance and the tough competitive environment.
Looking forward, Moody's said an upgrade is unlikely, in light of the flat overall operating performance. However, it noted that positive pressure could be exerted on the ratings if the company's operating profits return to growth.
Simultaneously, negative pressure would be exerted on the ratings if Next's operational performance deteriorates beyond Moody's assumptions.
Next shares closed 0.6% higher on Wednesday at 5,766.71 pence each.
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