Moody’s changes L Brands’ view to negative

Moody’s Investors Service said it changed the outlook for L Brands, Inc. to negative and affirmed all ratings of L Brands, Inc., including its senior unsecured guaranteed notes at Ba3.

“The widespread store closures as a result of the coronavirus pandemic and the ensuing suppression of consumer demand will weigh on Bath & Body Works’ earnings. Our base case assumes divestiture of Victoria’s Secret is executed and the impact of Covid-19 will likely result in excess of a 40% reduction in EBITDA,” stated Christina Boni, a Moody’s vice president, in a press release.

“However, we forecast earnings to recover in 2021. The negative outlook acknowledges that the recovery in 2021 may not be sufficient to support leverage returning below our current downgrade trigger of above 4x. The potential need to reduce its $1 billion revolver size following the divestiture of Victoria’s Secret could also reduce its financial flexibility,” Boni added.

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