Retail Credit Rating Downgrades

How to stop a downgrade becoming a default

What is happening?

COVID-19 disruption and resulting lockdown measures have particularly impacted some retailers. For those hard-hit, signs of declining demand and profit erosion can cause concern for banks lending to them. Other factors such as missed debt payments and renegotiation of rents can affect corporate credit ratings, which could in turn impact retailers' credit facilities.

Why does it matter?

Retailers typically use a range of external funding; from large syndicated facilities and bond programmes, to smaller revolving facilities and overdrafts. They may also use additional banking facilities such as invoice discounting, online payment facilities or guarantee facilities, or utilise derivatives for hedging. It is likely that these facilities were checked at the outset of the pandemic for financial covenants relating to turnover and profits and specific events of default linked to missed payments,