New Look gets ratings downgrade as Moody's questions its cash flow
Struggling retailer New Look has been hit by a fresh blow with credit ratings agency Moody’s having downgraded its ‘corporate family rating’ and ‘probability of default rating’. The move comes nearly a year after New Look was last downgraded and at a time when it’s still dealing with its store closure plan.
The new downgrade comes because Moody’s is worried about the firm’s ability to generate the cash it would need to continue trading and because it sees its debt levels as unsustainable. It thinks the company doesn’t generate sufficient cash to service its debt nor to carry through its capital spending plans.
It expects the retailer to have a cash balance of £20 million at the end of the 2019 fiscal year, which is only half of the amount Moody’s says it needs, according to reports.
That’s despite New Look having revealed a return to profits a few weeks ago and a slowdown in its revenue decline.
The firm is operating under a company voluntary arrangement (CVA) at the moment that sees it closing a large number of its UK stores as well as exiting China. In recent weeks it has announced that the original 60 UK closures planned has been widened to 85-90 stores.
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