Moody's has updated Belk's credit ratings after bankruptcy and, surprise, they are not good. Caa1, Caa2, and Caa3 are the néw ratings on their loans, with negative outlooks on all. Looks like the bankruptcy did nothing to help them except to provide them with some short term cash. Belk remains a high credit risk with high risk of default.
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"AssignEd NegativeRATINGS RATIONALEBelk, Inc.'s Caa2 CFR reflects Belk's weak liquidity and its poor operating performance that has been stifled by weak customer demand which has been curtailed significantly beginning when its stores were temporarily closed by at the onset of the coronavirus pandemic in March 2020. Upon emergence on February 25, 2021, Belk had $83 million of cash and $259 million outstanding on its ABL facility. The company received new capital commitments in total of $225 million from Sycamore Partners ("Sycamore"), KKR and Blackstone Credit which will enable to return to more normalized terms with its vendors. Despite the reduction of $450 million of debt through the bankruptcy process, Belk's leverage remains unsustainably high and leaves the company vulnerable to any potential future shocks with limited access to additional sources of capital. The company remains private equity controlled. The company's modest scale and regional profile with a concentration in the southeastern U.S. region and modest scale in the challenged U.S. department store sector also is a constraint. Belk's stores have a significant concentration in three states (North Carolina, Georgia, and South Carolina).The negative outlook reflects the need to grow its business in an extremely challenging operating environment for the department store industry. The negative outlook also reflects that its unsustainable capital structure elevates the risk of future distressed exchanges." From the Moody's report released today.
"The ratings outlook is negative.The assignment reflects governance considerations particularly Belk's continued private equity ownership with Sycamore Partners ("Sycamore") controlling ownership and its execution of its prepackaged Chapter 11 filing on February 25, 2021 through which funded debt was reduced by approximately $450 million, and extended all term loan maturities until July 2025. The assignment also reflects Belk's continued weak credit metrics and liquidity."
Bring out the string section.. this ship is sinking.
The change happened today.
It was stable, now it was changed to negative.
I believe outlook was upgraded to positive; am I mistaking?