Moody’s downgrades L Brands

Moody’s Investors Service said it downgraded all ratings of L Brands, Inc., including its corporate family rating to B2 from B1 and its probability of default rating to B2-PD from B1-PD.

The agency also downgraded the company’s senior unsecured guaranteed notes to B2 from B1 and the senior unsecured unguaranteed notes to Caa1 from B3, but upgraded the speculative grade liquidity rating to SGL-2 from SGL-3.

“The downgrade reflects that the spinoff of Victoria’s Secret has been terminated, which increases L Brands’ cash burn as it must turnaround Victoria’s Secret in the midst of the disruption posed by Covid-19,” said Christina Boni, a Moody’s vice president, in a press release.

“L Brands needs to preserve liquidity and address its upcoming maturities which the terminated spinoff would have helped address,” Boni added.

The upgrade to SGL-2 from SGL-3 is based on obtaining an amendment to its revolver, which removed previous maintenance covenants and added springing fixed charge covenant, Moody’s said. Also, L Brands suspended its dividend, cut capital expenditures, among other steps to stem cash outflows.

The outlook is negative. This rating action concludes the review for downgrade Moody’s started on April 28, the agency said.

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