Moody's list of retailers at risk of filing for bankruptcy grows to 22

By

Rebecca Taras

Published
Jun 16, 2017

According to a recent report conducted by Moody’s Investors Service, the number or retailers at risk for filing for bankruptcy is expected to grow over the next 12 to 18 months due to current industry challenges such as the shift to online that are affecting big name retailers like Sears Holdings and Neiman Marcus Group among countless others.

 
Since February 2017, Moody’s list of troubled retailers has grown from 19 (at its height since the Great Recession) to 22. "The majority of retailers remain fundamentally healthy," said Moody's Lead Retail Analyst Charlie 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."
 
Of the companies on the list, seven will be faced with $1.1 billion from potential maturities derived from asset-based loans and lines of credit next year, placing both stressed and distressed issues at risk of default. Moody’s accentuates this risk, however, to determine a three percent decline in the US speculative-grade default rate by April of 2018—down 1.5 percent from today. In terms of a comparison to these predictions, spec-grade retail and apparel default forecasts are reported at 6.7 and 6.8 percent.

Despite the serious nature of the report in terms of the current retail climate, the 22 companies on the distressed list only represent 16 percent of the retailers analyzed by Moody’s. It’s been reported that Lead Retail Analyst Charlie O'Shea issued a statement saying the majority of other retailers remain fundamentally healthy. While the current report is merely an analysis of the financial future of these struggling retailers, a previous report from Moody’s issued in March proved to be accurate in many cases. For example. Payless ShoeSource and Rue21, have since then filed for bankruptcy and Gymboree has already missed an interest payment on senior notes due in 2018 as of June 1.