Debenhams posted a poor Christmas trading update and is currently holding discussions to refinance its £320m revolving credit facility. The department store reported a 3.4% drop in group like-for-like sales over the festive period.
The ratings agency said it believed the company’s “prospects of access to fresh capital” will have been “hindered by the significant fall in Debenhams share price.”
Following the news of its restructuring program, the rating of New Look was downgraded as Moodys said the company’s outlook “remains negative”.
On Monday (14 January) New Look announced it reached an ‘in principle’ debt-for-equity swap proposal with key stakeholders to reduce its debt from £1.35bn to £350m. Today, (18 January) the fashion chain announced its Belgian arm had filed for insolvency.
David Beadle, Moody’s vice president and lead analyst for Debenhams, said: “[The] 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.
“However, notwithstanding this and the company’s elevated leverage we continue to view Debenhams liquidity profile as adequate for the time being.”
Roberto Pozzi, senior vice president at Moody’s and lead analyst for New Look, added: “We’ve downgraded New Look’s instrument ratings to reflect the proximity to a distressed exchange, which constitutes a default under our methodologies, and the higher-than-expected losses for financial creditors if the company’s proposed debt restructuring plan is successfully implemented.”