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'Distressed retailers' ranks to grow amid industry shift'
14
Jun '17
The ranks of distressed retailers are set to keep growing over the next 12 to 18 months amid a secular shift in the industry, says Moody's Investors Service in a report. In February, among Moody's rated retail and apparel issuers, 19 retailers had ratings of Caa or lower. The number has grown to 22, or 15 per cent, of the firm's retail and apparel universe.

Debt rated at Caa, or below, is the lowest ranked on Moody's credit rating spectrum. The report called 'US Retail and Apparel: B2/B3 Issuers Gain Spotlight as Distressed Retail and Apparel Ranks Grow' by Moody's provides an overview of factors that impact companies at these rating levels.

"The majority of retailers remain fundamentally healthy. But as select groups of retailers continue to deteriorate – in particular department stores and specialty retailers – we believe the distressed ranks will keep growing, fueled in part by distinct vulnerabilities within the B2/B3 retail population," said Charlie O'Shea, Moody's lead retail analyst.

Of Moody's 42 B2/B3 rated issuers (as of April 30, 2017), seven face $1.1 billion of potential maturities for asset-based loans and revolving credit facilities in 2018 – elevating the risk of default for already-stressed and distressed issuers should the strong refinancing pace driving recent high-yield issuance recede. Such a risk is underscored by Moody's US speculative-grade default forecast, which predicts a decline in the overall US speculative-grade default rate to 3 per cent by April 2018 from 4.5 per cent, even as spec-grade retail and apparel default forecasts trend significantly higher, at 6.7 per cent and 6.8 per cent, respectively. (KD)

Fibre2Fashion News Desk – India


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