This just landed in my google alerts posted so I can't accused of not being balanced11 Nov 2022 12:34
Obviously, downgrade is not great and Moody's can defo be tainted with not forward looking reactive and not proactive but here you go I think there's some great positives NOW in momentum ready for THG to be upgraded back to B1
London, November 10, 2022 -- Moody's Investors Service (Moody's) has today downgraded the corporate family rating (CFR) of THG Operations Holdings Limited (THGO or the company) to B2 from B1. In addition the rating agency downgraded the company's probability of default rating (PDR) to B2-PD from B1-PD and rating of the company's guaranteed senior secured bank credit facilities comprising a EUR600 million term loan B and GBP170 million revolving credit facility (RCF) to B2 from B1. The outlook on all ratings remains stable.
RATINGS RATIONALE
Today's rating action reflects Moody's view that lower profit growth in 2023 than the rating agency previously expected in combination with higher gross borrowings will result in the THGO's credit metrics remaining weaker than Moody's consider acceptable to maintain a B1 CFR for the company.
The year to date results of the company's listed parent THG PLC have been adversely affected by compressed gross margins, notably within the company's Nutrition division, as it chose to limit price increases despite high input cost inflation. As a consequence, and considering the weak consumer sentiment across many markets as the company enters its peak trading season, Moody's expects THG's full year company-adjusted EBITDA to be towards the lower end of its publicly guided range of GBP100 million to GBP130 million, materially lower than the GBP161 million recorded in 2021.
While Moody's base case is that the company's 2023 EBITDA can grow strongly to more than GBP150 million, this is below the rating agency's initial expectations for 2022 and well short of its previous 2023 base case. After factoring in the company's recently drawn GBP156 million new loan as well as lease liabilities of more than GBP350 million, the company's gross debt exceeds GBP1 billion. As such, Moody's forecasts that the company's Moody's-adjusted gross leverage will remain close to 7x at the end of 2023, considerably higher than the 5.5x level the agency considers the maximum acceptable for THGO to have a B1 rating.
More positively, Moody's considers that THGO has good liquidity, thanks to a sizeable cash balance on THG's consolidated Balance Sheet, which the rating agency expects to be in the region of GBP500 million at the end of this year. This is despite Moody's expectations that THG will in 2022 once more have negative free cash flow of over GBP200 million, broadly similar to the outflows in both 2020 and 2021 and that its free cash flow will remain negative in 2023, albeit likely to a materially lower extent than in 2022. This year's negative free cash flow is largely offset by the proceeds of the new
https://www.moodys.com/research/Moodys-downgrades-THGOs-CFR-to-B2-from-B1-outlook-stable--PR_471212
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