Moody's lifts E Mart view to stable

Moody's Investors Service said it revised the outlook on E Mart Inc.'s Baa2 issuer rating to stable from negative.

The agency also said it affirmed the company's Baa2 issuer rating.

The revised outlook reflects its improved financial leverage in 2017, Moody's said, along with an expectation that such de-leveraging will continue into 2018, primarily owing to a decrease in adjusted debt.

The agency said it estimates that E Mart's adjusted debt-to-EBITDA ratio improved to about 4x in 2017 from 4.2x in 2016 because a moderate growth in adjusted EBITDA more than offset a slight increase in adjusted debt.

Moody's also said it expects E Mart's adjusted debt-to-EBITDA ratio would improve further to about 3.8x in 2018 because reduced rental expenses will allow its adjusted debt to decrease moderately. This despite the fact that the company's capital spending will likely remain elevated and its operating environment will stay difficult.

The ratings also consider the company's moderate profitability stemming from the intense competition from its domestic rivals and other retail formats, the agency said, and its moderate diversification in terms of geography and retail format.

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