Moody's downgrades E Mart

Moody's Investors Service said it downgraded E Mart Inc.'s issuer rating to Baa2 from Baa1. The outlook is stable.

"The rating action reflects our expectation that E Mart's financial leverage will remain elevated and weak for a Baa1 rating over the next one to two years given the continued sluggishness in its operating performance and sizable capex programs," Chris Park, a Moody's vice president and senior credit officer, said in an agency news release.

Moody's expects E Mart's ratio of adjusted debt to EBITDA to increase to about 4.2 times over the next two years from 3.6 times in 2013 and its retained cash flow to net debt to weaken to about 19% from 23% in the absence of significant deleveraging activities. These projected ratios are more in line with a Baa2 rating.

The stable outlook factors in the agency’s expectation that E Mart's will maintain its robust market position in Korea and, despite a gradual weakening, its financial profile will remain consistent with the Baa2 rating category over the next 12 to 18 months.

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