LONDON (Alliance News) - Moody's Investors Service on Thursday downgraded Debenhams PLC's rating to Ca, as it believes that the company's refinancing will inevitably lead to creditor losses.
Debenhams shares were trading 6.4% lower at 2.01 pence each.
The credit agency cut Debenhams' corporate family rating to Ca from Caa1 and its probability of default rating to Ca-PD from Caa1-PD.
Concurrently, Moody's has downgraded the rating on the GBP200 million 2021 senior notes issued by the company to Ca from Caa1.
The outlook on the company remains negative, Moody's added, reflecting the credit agency's view that Debenhams will default on its financial obligations.
"We have downgraded Debenhams' ratings as a balance sheet restructuring involving losses for financial creditors looks inevitable," Moody's senior credit officer David Beadle said.
He added: "Revenue and profitability continue to fall, and plans to shrink rental costs won't be enough to repair the retailer's capital structure, with a debt to equity swap now a likely element of any solution."
The decision follows Debenhams agreeing with its existing lenders and bondholders a refinancing, by way of amending the terms of its 5.25% senior notes due 2021.
On Friday, the department store operator put in place new facilities amounting to GBP200 million with its existing lenders, helping the struggling retailer secure liquidity headroom.
However, it warned that certain conditions of the new loan might result in an outcome that will leave "no equity value" for the company's current shareholders.
