4th Dec 2019 07:23
(Alliance News) - Moody's Investors Service said Tuesday it has placed under review for possible downgrade the Ba3 long-term corporate family rating and Ba3-PD probability of default rating of Ocado Group PLC, as increased funding commitments will affect the online grocer's credit metrics.
Conversely, Moody's said it has placed under review for possible upgrade the Ba3 rating Ocado's GBP250 million backed senior secured notes due 2024. The outlook has changed to rating under review from stable.
The investor service said its action follows Ocado's announcement on Monday that it intends to issue approximately GBP600 million of senior unsecured convertible bonds due 2025.
Moody's said the proposed issuance will result in Ocado's gross Moody's-adjusted debt more than doubling to approximately GBP1.1 billion.
The rating agency said it recognizes that the company's already good liquidity will be enhanced by the issuance. In turn, this will provide further support for Ocado's significant capital spending commitments, which have increased recently, notably with respect to the new contract with Japanese grocer Aeon.
On Friday last week Ocado signed an agreement with Aeon to develop the Japanese grocer's online business using the Ocado Smart Platform.
"However, the increased funding commitments will mean that Ocado's credit metrics, which were already stretched for the Ba3 rating category, will deteriorate further during 2020," Moody's said.
Ocado shares closed 0.4% higher in London at 1,198.74 pence each on Tuesday.
By Loreta Juodagalvyte; [email protected]
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