S&P lowers Li & Fung

S&P said it downgraded its ratings on Li & Fung Ltd. and its senior unsecured notes to BB+ from BB- and its subordinated perpetual hybrid securities to B+ from BB. The recovery rating on the senior unsecured notes is 3.

“The downgrade mainly reflects the weakening in Li & Fung's business strength post the sale of its logistics business. The asset sale will clearly reduce the company's EBITDA base. It will also lower business diversity, and growth potential, and could increase cash flow volatility. The likely improvement in debt leverage and EBITDA coverage from the use of the sale proceeds will not fully offset the negative impact, in our view,” S&P said in a press release.

However, the agency noted Li & Fung reported 26% revenue growth in the first half of 2022, though it considers the diversity and EBITDA from the logistics business as “very difficult to replace.”

The outlook is stable.

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