Moody’s lowers Edcon, notes

Moody's Investors Service said it downgraded Edcon Holdings Ltd.’s corporate family rating to Ca from Caa3 and affirmed the probability of default rating at Ca-PD/LD.

The limited default "LD" designation appended to the probability of default rating continues to reflect the deferral of interest payments in March and September 2016 to December 2016, which constitutes a default under Moody's definition. The limited default designation will remain until the company resolves the missed payment.

Concurrently, the super senior secured payment-in-kind (PIK) notes (totaling €116.4 million) due 2019 were downgraded to Ca (LGD3) from Caa2 (LGD3); and the senior secured notes (totaling €617 million and $250 million) due 2018 and the senior secured PIK toggle notes (€36.2 million) due 2019 were downgraded to C (LGD5) from Ca (LGD4), all issued by Edcon Ltd.

The outlook on all ratings is stable.

Moody’s said the action follows Edcon's Sept. 20 announcement of its proposed restructuring of the group's entire capital structure, whereby roughly 80% of Edcon's secured debt creditors agreed, through a lock-up agreement, to the key terms of the debt restructuring. The capital restructuring is considered to be a distressed exchange and will result in a default under Moody's definition.

The agency expects the proposed capital structure, which is subject to noteholder and competition approvals, to be concluded during the last quarter of 2016, following which Moody's will look to revisit Edcon's rating position.

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