NEW YORK — Moody’s Investors Service lowered the long-term ratings of May Department Stores Co. and separately, placed the long-term ratings of J.C. Penney’s on review for possible upgrade.
This story first appeared in the July 13, 2004 issue of WWD. Subscribe Today.
The rating agency on Monday lowered May’s long-term ratings to “Baa2” from “Baa1.” It also affirmed May’s “Prime-2” short-term rating while saying the retailer’s rating outlook was “stable.”
Moody’s said the downgrade was because of an increase in debt by May to acquire Marshall Field’s department store operation, along with nine stores from Mervyn’s, for $3.24 billion. The agency said because of the benefits of the acquisition, which includes giving May a larger presence in three major markets and limited geographic overlap in store sites, the downgrade was limited to one notch. Moody’s added that the stable rating outlook also reflects those benefits, along with the progress May made in building its private label business.
In the case of J.C. Penney, the long-term debt ratings were placed on review for possible upgrade, reflecting strong same-store sales gains since December as well as the pending completion of the sale of its Eckerd division. The sale, Moody’s said, will generate net proceeds of $3.5 billion and stop the drain on free cash flow.
Moody’s also affirmed Penney’s speculative grade liquidity rating at “SGL-1.”
— Vicki M. Young