Moody’s trims Kirk Beauty, view to stable

Moody’s Investors Service said it downgraded to B3 from B2 the corporate family rating of Kirk Beauty One GmbH, or Douglas. The agency also downgraded to B3-PD from B2-PD its probability of default rating, to Caa2 from Caa1 the rating assigned to the €335 million senior unsecured notes sold by Kirk Beauty and to B2 from B1 the rating assigned to the senior secured facilities borrowed by its subsidiaries, comprising a €200 million revolver, €1.67 billion term loan B and €300 million senior secured notes.

“The ratings downgrade reflects Douglas’ weaker than expected operating performance in fiscal year ending September 2019, owing to continued decline in operating margins, mainly in Germany, its largest market, due to a tough competitive environment,” said Lorenzo Re, a Moody’s vice president, senior analyst and lead analyst for Douglas, in a press release. “As a result of the weak operating performance, Douglas’ leverage remained above 6x in fiscal 2019, and will remain high for a prolonged period of time, above the maximum tolerance allowed under the existing B2 rating.”

Moody’s said it believes the recovery and deleveraging prospects are challenged by competitive pressure in the market, which is expected to persist and will continue to hurt margins for a prolonged period.

The agency changed the outlook to stable from negative for Kirk Beauty One GmbH and Douglas GmbH. The stable outlook indicates Moody’s forecast Kirk One’s operating performance should stabilize at the current level over the next 12-18 months, with margins remaining under pressure and leverage remaining between 6x and 6.5x.

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