Coronavirus: Moody’s reviews Next for downgrade

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Coronavirus: Moody's reviews Next for downgrade
All of Next’s stores and online operations temporarily shut down amid the government's lockdown order last week.
// Moody’s places Next’s credit rating from a “stable” status to “under review”
// Next’s rating is on review to downgrade to Baa3 from Baa2
// Moody’s acknowledged Next’s track record of stable profits, strong cash generation & balanced financial policies

Credit rating agency Moody’s has placed Next on review for downgrade amid concerns over how long stores will remain closed and whether consumer demand will recover once the lockdown is lifted.

Moody’s placed Next’s long-term issue rating and backed senior unsecured rating on review to downgrade to Baa3 from Baa2.

It also has changed the fashion retailer’s outlook to under review from stable.


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However, Moody’s acknowledged Next’s track record of stable profits, strong cash generation and balanced financial policies.

The news comes after all of Next’s stores and online operations temporarily shut down amid the government’s lockdown order last week.

”Although Moody’s expects the company to successfully navigate through the weeks and months ahead, there can be no certainty at this stage as to how long store closures persist or how quickly demand recovers,” Moody’s stated.

“Moody’s believes that Next may be able to return to credit metrics commensurate with its current ratings during the course of 2021.

“However, in addition to downside risks in respect of the timing, shape and certainty of a return to pre-crisis levels of demand, the rating agency notes that Next may choose to return to historic levels of shareholder distributions from a more leveraged position, which would constrain its ability to return to pre-crisis credit metrics.

”More positively, Moody’s recognises Next’s track record of stable profits and strong cash generation; the company’s balanced financial policies which have seen it maintain stable credit metrics over many years while distributing surplus cash to shareholders; the detailed planning and scenario analysis the company has undertaken in respect of the coronavirus crisis; the steps already announced by the company to maintain an acceptable liquidity profile in the months ahead, which in Moody’s view is also supported by Next meeting the qualifying criteria to access the joint HM Treasury and Bank of England Covid Corporate Financing Facility.”

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