Fitch: Parkson Retail on watch

Fitch Ratings said it placed Parkson Retail Group Ltd.’s long-term issuer default rating and senior unsecured rating of BB- on Rating Watch negative.

The BB- rating on its $500 million 4½% senior notes due 2018 also were placed on negative watch.

The action follows news that the company has agreed to buy 67.7% of Parkson Retail Asia Ltd. from its parent, Parkson Holdings Bhd. for S$228 million in cash, Fitch said.

The transaction is subject to shareholder and regulatory approvals, the agency said.

The successful completion of the acquisition will result in Parkson breaching the negative rating sensitivities of more than 6x for adjusted FFO net leverage and less than 1.3x for fixed-charge coverage.

The negative watch will be resolved when the acquisition is completed or when it is terminated, whichever comes first, Fitch said.

Parkson’s rating will be downgraded by one notch if it closes the acquisition, the agency said.

Parkson already faces severe operational headwinds and the acquisition could further weaken its liquidity, Fitch said.

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