2nd Nov 2018 14:49
LONDON (Alliance News) - Moody's Investors Service on Friday downgraded department store chain Debenhams PLC's long-term corporate family rating to Caa1 reflecting challenges in the firm's current debt facilities refinancing.
"Downgrading Debenhams to Caa1 reflects the challenges it faces to improve its credit quality during 2019 in order to achieve a timely and cost effective refinancing of its current debt facilities," David Beadle, a Moody's vice president and credit officer, said.
"In the meantime however, we expect the company to at least stabilise profitability, materially improve net cash generation, and for its liquidity to remain adequate," he added.
Moody's downgraded the chain to B2 in August, bracing for its annual results, which came in "in line" with its views.
Last week, Debenhams posted an annual pretax loss of GBP491.5 million on revenue of GBP2.28 billion.
Moody's said it sees a "higher downside risk to its forecast profitability for Debenhams, most notably over the upcoming Christmas season, than previously anticipated, as the competitive environment remains highly challenging".
Debenhams Caa1 rating reflects an increased risk around a timely and cost-efficient refinancing of debt, high operating and financial leverage due to long store leases, a highly competitive and promotional environment in the UK and recent negative sales and margin developments in UK operations.
However, Moody's believes Debenhams' outlook to be positive, driven by the scale of the business in the UK, growth in its online division and the diversification of its portfolio.
Debenhams shares were trading up 1.2% at 8.74 pence each.
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