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Moody's nicks Morrisons
Moody’s Investors Service said it lowered the corporate family rating and the probability of default rating of Market Holdco 3 Ltd., a holding company formed to effect the acquisition of Wm Morrison Supermarkets Ltd. (Morrisons), to B2 from B1 and to B2-PD from B1-PD, respectively.
The agency also downgraded Morrisons' backed senior unsecured MTN program rating to (P)B2 from (P)B1. Moody’s also downgraded to B2 from B1 the ratings of the backed senior unsecured ratings of all the bonds issued under the program by Wm Morrison Supermarkets, the backed senior secured bank credit facilities issued by Market Bidco Ltd., and the backed senior secured notes issued by Market Bidco Finco plc. The £1.2 billion privately placed backed senior unsecured notes issued by Market Parent Finco plc were downgraded to Caa1 from B3. Around £83 million of the bonds issued under the MTN program remain outstanding following the completion of a tender offer previously launched by Clayton Dubilier & Rice, LLC (CD&R). The outlook has changed to negative from stable.
“The downgrade of Morrisons' CFR to B2 from B1 was triggered by the company's operating underperformance in fiscal 2022, ended Oct. 30 and resultant weak credit metrics. Leverage, measured in terms of Moody's adjusted gross debt to EBITDA, stood at 9.1x at Oct. 30, 2022. Moody's also anticipates that over the next 12-18 months, although improving from recent levels, leverage will remain significantly above the agency's expectation of leverage below 6.5x for the B1 rating previously assigned,” the agency said in a press release.
The negative outlook reflects the expectation that Morrisons' debt metrics (on a Moody's adjusted basis) could stay weak for the B2 rating, although improving from current levels.
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