Ratings agency considering review after poor trading update

DSGi facing credit downgrade

Moody’s has motioned that it may place DSGi’s credit rating under review, with a view to downgrading it, after the retail chain posted a weak trading statement last week.

The ratings agency cited weakening margins and challenging trading conditions as reasons for the review, said Corporate Finance lead analyst Yasmin Serghini.

She said that there was a significant risk that full year profits "would trend below Moody’s previously indicated guidance of £130m", therefore placing the retailer’s Ba1 rating under threat.

Serghini warned: "This would result in weaker credit metrics, with a leverage ratio moving above five times, a level that Moody’s would not view as commensurate with a Ba1 rating category."

Moody’s said that it would be keeping a close eye on the group over the critical Christmas trading period and on "its ability to successfully control costs across the group to mitigate the negative effects of a reduction in customer spending".

A downgrade would make it more difficult for DSGi to gain credit.

Source: Retail Week

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