Moody’s: Edcon exchange is distressed

Moody's Investors Service said it declared Edcon Holdings Ltd.’s exchange offer, implemented on July 29, to be a distressed exchange and an effective default on the company's €425 million senior unsecured notes due 2019.

As a result, the probability of default rating was revised to Ca-PD/LD to designate a limited default. The rating will be revised back to Ca-PD after three business days.

Concurrently, the agency affirmed Edcon's Caa1 corporate family rating, Ca-PD/LD probability of default rating, the Caa1 ratings of the senior secured noted due 2018 issued by Edcon Ltd. and the Ca ratings assigned to the senior unsecured notes due 2019 issued by Edcon Holdings.

The outlook is negative.

Edcon announced that it reached an agreement with 97.3% of the senior unsecured note holders to exchange €413.7 million senior unsecured notes due 2019 for a new €200 million option A and €241 million option B senior unsecured 13 3/8% payment-in-kind (PIK) notes due 2019.

Under Moody's definitions, this is considered a distressed exchange and a limited default on the senior unsecured notes as it represents a diminished financial obligation relative to the original agreement.

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