S&P downgrades Debenhams

S&P said it lowered its long-term issuer credit rating on Debenhams plc to B+ from BB-.

The outlook is negative.

At the same time, the agency lowered the long-term issue ratings on the £225 million senior unsecured notes to B+ from BB-. The 3 recovery rating is unchanged, reflecting an expectation of average recovery (50%-70%; rounded estimate: 60%) in the event of default.

“The downgrade reflects a view that, despite signs of improvement in the second half of the year, overall trading conditions for discretionary goods retailers in the U.K. will remain extremely challenging in 2018,” S&P said in a news release.

“Debenhams' recently reported further declines in like-for-like sales and profitability margins have led to credit metrics that are materially weaker than in our previous base case, particularly regarding reported free operating cash flow (FOCF) generation.”

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