Moody’s lowers Takko CFR, notes to Caa1

Moody's Investors Service said it downgraded the corporate family rating of Takko Fashion Sarl to Caa1 from B3 and its probability of default rating to B3-PD from B2-PD.

Concurrently, the agency downgraded the rating of €525 million senior secured notes due 2019 issued by Takko Luxembourg 2 SCA to Caa1 from B3.

The outlook was revised to stable from negative.

Moody’s said the downgrade reflects its view that the initiatives announced by the company in September following its strategic review carry execution risk, and will take time to have a meaningful positive effect on financial metrics.

In the meantime, market conditions remain challenging both in terms of consumer sentiment and economic conditions in the German domestic market and in competitive dynamics across a number of other countries in which they operate.

As such, like-for-like sales, margins and overall profitability remain under pressure and accordingly, the company's free cash flow remains weak to negative. Leverage is currently significant at over 8 times on a Moody's-adjusted basis and the rating agency sees limited scope for deleveraging in the short- to medium-term.

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