“It’s A Perfect Storm”: List Of Retailers In Danger Of Bankruptcy Hits Record 22
by Tyler Durden
ZeroHedge.com
Jun 9, 2017
The US retail sector continues to sink at an alarming rate, and according to the latest iteration of Moody’s list of retailers who were in danger of filing for bankruptcy had “only” ten names, there are now 22 distressed retailers whose troubled financials the rating agency believes could make them potential bankruptcy candidates in the near future, up substantially from just two months ago, and topping the 19 recorded at the peak of the Great Recession.
According to Moody’s analyst Charles O’Shea, legacy retailers such as Sears, Neiman Marcus and others on the rating agency’s retail distress list, face a “perfect storm” and warned that “you’re on the Andrea Gail right now, and the water’s starting to get very choppy.” The worst could be yet to come as the Moody’s analyst writes that “the ranks of distressed retailers is set to keep growing over the next 12 to 18 months amid a secular shift in the industry.”
Moody’s list consists of all retailers which have ratings of Caa or lower. That number has grown to 22, or approximately 15%, of the firm’s retail and apparel universe. “When you’re down there in C-a land, bankruptcy is a real possibility,” O’Shea said.
“The majority of retailers remain fundamentally healthy,” said O’Shea, “But as select groups of retailers continue to deteriorate — in particular department stores and specialty retailers — we believe the distressed ranks will keep growing, fueled in part by distinct vulnerabilities within the B2/B3 retail population.”
Focusing on those retailers with imminent default risk, Moody’s adds that of 42 B2/B3 rated issuers (as of April 30, 2017), seven face $1.1 billion of maturities for asset-based loans and revolving credit facilities over the next year- elevating the risk of default for already-stressed and distressed issuers should the strong refinancing pace driving recent high-yield issuance recede. Such a risk is underscored by Moody’s US speculative-grade default forecast, which predicts a decline in the overall US speculative-grade default rate to 3% by April 2018 from 4.5% today, even as spec-grade retail and apparel default forecasts trend significantly higher, at 6.7% and 6.8%, respectively.
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