RE: Moody reaffirm rating!16 Jan 2019 20:50
For those who is lazy and do not bother to open the link or having trouble opening it..
London, 16 January 2019 -- Moody's Investors Service ("Moody's") has today changed to negative from stable the outlook on the Caa1 corporate family rating (CFR), Caa1-PD probability of default rating (PDR) of Debenhams plc (Debenhams or the company), as well as the Caa1 rating on the GBP200 million due 2021 senior unsecured notes issued by the company. Moody's has affirmed all the ratings.
"Today's change in outlook reflects our view that there is a risk that refinancing negotiations may not result in a timely and cost effective solution and thus the process could ultimately culminate in losses for financial creditors", says David Beadle, a Moody's Vice President -- Senior Credit Officer and lead analyst for Debenhams. "However, notwithstanding this and the company's elevated leverage we continue to view Debenhams liquidity profile as adequate for the time being", he added.
RATINGS RATIONALE
Last week Debenhams published a Christmas trading update. Alongside weak operational performance, the company announced discussions have commenced with lenders in respect of the refinancing of its GBP320 million revolving credit facility (RCF), which is due to mature in June 2020. Pending the outcome of those discussions, which the company stated includes the option to bring new sources of finance into the business, asset disposals have been put on hold.
Moody's had previously envisaged that a sale of the company's Danish business, Magasin du Nord, would be likely ahead of a refinancing. In the rating agency's view, this would have resulted in a more manageable ongoing borrowing requirement. Moody's understands that maximising value from disposals is difficult if potential buyers consider they are dealing with a 'forced seller'. However, the company's high debt burden and weak operating performance could hinder its ability to successfully conclude a timely and cost effective refinancing without a fresh injection of equity capital.
The rating agency believes the company's prospects of access to fresh capital will have been hindered by the significant fall in Debenhams share price. The company's market capitalisation has declined from over GBP500 million in late 2017, to around GBP100 million at the time of its preliminary results announcement in October 2018, to less than GBP50 million at the time of writing. Furthermore, the company's largest shareholder, Sports Direct International has been publicly vocal in its dissatisfaction with board. Most recently this was evidenced at last week's AGM when shareholder votes led to the resignation of the Chairman and the removal of the CEO from the company's board.
LIQUIDITY ANALYSIS
Debenhams liquidity profile has historically been good. As at 5 January 2019 net debt of GBP286 million compared to GBP520 million of committed facilities, comprising the RCF and unsecured notes. The company's cessation of dividen
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