Moody’s improves El Corte Inglés rating but expects a significant drop in annual turnover

Moody’s improves El Corte Inglés rating but expects a significant drop in annual turnover

New York – On Tuesday Moody’s ratings agency confirmed that it
maintains El Corte Inglés’ long-term credit rating at Ba1.

Moody’s analysts have also affirmed the Ba1 rating of the department
store operator’s senior bond issue for 690 million euro. Moody’s highlights
the “solid performance of its food and online business during the closing
of stores caused by the coronavirus” and also bases its decision on the
group’s deleveraging plan, which started before the beginning of the
confinement and which had allowed it to reduce its indebtedness and improve
their ratios.

Moody’s appreciates El Corte Inglés’ liquidity improvement

In addition, it has positively valued the improvement in the company’s
liquidity in the face of its new lines of credit (Moody’s anticipates that
the company’s leverage will be around 4.0x in the next 18 months.) El Corte
Ingles signed an Antivirus credit for 1,311 million euro, to which must be
added the 2,000 million euro of refinancing signed just before the crisis,
and also to the measures “that have allowed reducing the consumption of
cash during closings”, among which includes the furloughs approved in April
for 26,000 of the group’s workers.

It should be remembered that in April the rating agency placed the
Spanish group under “negative surveillance” for having had to close all its
stores except the food spaces; the closings were maintained from March 14
to June 8.

“Despite the closure of all its stores since March 14 (all but the food
areas), El Corte Inglés was able to generate income in the first quarter
through its food subsidiaries and its online store. Since June 8 has
reopened its stores and we expect the company’s sales to recover gradually
during the rest of fiscal year 2020,” summarises the Moody’s report.

Annual turnover could drop close by circa 30 percent

However, the future does not look so bright: Moody’s has downgraded its
outlook to negative, also estimating the group’s total revenue reduction at
the end of the year at around 4.4 billion euro.

“The drop in revenue is mitigated by the actions carried out to reduce
operating costs.” Moody’s expects sales to continue to recover in 2021.

Photo credits: El Corte Inglés


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