Moody's: Number of distressed retailers tops total during financial crisis
Kevin McCoy , USA TODAY Published 5:00 a.m. ET June 9, 2017 | Updated 3 minutes ago For decades, Americans have loved to shop at malls. But now, the industry as a whole is taking a bit hit. The list of U.S. retailers with troubled financials that could make them potential bankruptcy risks now totals 22, according to ratings by Moody's Investors Service — topping the 19 recorded at the peak of the Great Recession. Confronting a major shift to online shopping Sears Holdings, Neiman Marcus Group and others on the list face a "perfect storm," senior Moody's retail analyst Charles O'Shea said Thursday, as he invoked the name of the Massachusetts fishing boat lost with all hands in a 1991 tempest. The disaster, chronicled by author Sebastian Junger, was later made into a movie featuring actors George Clooney and Mark Wahlberg. "You're on the Andrea Gail right now, and the water's starting to get very choppy," O'Shea said of the financial conditions buffeting troubled retailers. And the worst could be yet to come. The ranks of distressed firms and retail sector defaults are likely to grow during the next 12 to 18 months, the rating agency predicted in a separate report issued Wednesday. Nonetheless, the companies on the distressed list represent just 16% of the retailers analyzed by Moody's. "The majority of retailers remain fundamentally healthy," O'Shea said in a statement issued with the report. The rating giant tapped companies for inclusion on the list based on an analysis of their financial liquidity, ability to manage maturing debt by refinancing, credit profiles, competition challenges, ownership, and management structure.Those that rank low in multiple categories were given Caa ratings, which O'Shea characterized as "deep junk." "When you're down there in C-a land, bankruptcy is a real possibility," he said. Although it is impossible to predict the financial future of the companies, an earlier Moody's list of distressed retailers issued in March proved prophetic in a few cases. Discount footwear company Payless ShoeSource and Rue21, a teen fashion retailer, have since filed for bankruptcy court protection. Gymboree, a specialty seller of children's apparel, missed a June 1 interest payment on senior notes due in 2018. Companies tagged with a Caa rating by Moody's can and do get higher ratings if their liquidity, debt management or other financial metrics improve. "There are companies that come out of that," said O'Shea, who noted that iconic retailer J.C. Penney "was down there, and is now out," with an improved rating. Retailers rated Ca or lower by Moody's: Boardriders SA - sporting subsidiary of Quiksilver The Bon-Ton Stores - parent of department store chain Fairway Group Holdings - food retailer Tops Holding II - supermarket operator 99 Cents Only Stores - discount retailer TOMS Shoes - footwear company David's Bridal - wedding dresses and formalwear seller Evergreen AcqCo 1 LP - parent of thrift chain Savers Charming Charlie - women's jewelry and accessories Vince LLC - clothing retailer Calceus Acquisition - owner of Cole Haan footwear firm Charlotte Russe - women's clothing Neiman Marcus Group - luxury department store Sears Holdings - owner of Sears and Kmart. Indra Holdings - holding company owner of Totes Isotoner Velocity Pooling Vehicle - does business as MAG, Motorsport Aftermarket Group Chinos Intermediate Holdings - parent of J. Crew Group Everest Holdings - manages Eddie Bauer brand Nine West Holdings - clothing, shoes and accessories Claire's Stores - accessories and jewelry True Religion Apparel - men's and women's clothing Gymboree - children's apparel
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