March 25, 2020 / 12:00 PM / 5 days ago

Moody's cuts Dufry to Baa3, says more may be needed to bolster liquidity

ZURICH, March 25 (Reuters) - Dufry may be forced to take more measures to shore up liquidity, Moody’s Investors Service said on Wednesday, as it cut the Swiss airport retailer’s credit rating to “Baa3” from “Baa2,” a notch deeper into non-investment grade territory.

Moody’s put Dufry on review for a further downgrade and concluded the probability of a default had grown. It also said Dufry’s share decline — the stock is down nearly 40% from its January high, despite a 10.5% rise on Wednesday — may limit its access to capital, should it seek to tap investors for more.

Dufry’s net debt was 3.1 billion Swiss francs ($3.16 billion) at the end of 2019, or 3.52 times adjusted operating cash flow. The retailer this month announced measures to trim 60 million francs from costs, including by reducing employees and renegotiating rents, and said it was not expecting a liquidity crunch.

Moody’s said that may not be enough.

“Depending on the severity and duration of the pandemic, the company’s liquidity could be materially diminished in the absence of additional funding or actions to preserve cash which were not previously contemplated,” Moody’s said.

Dufry did not immediately respond to questions about the downgrade or whether it will have to take additional measures if the coronavirus’s impact on travel and airport retail deepens.

The Swiss government was meeting on Wednesday to finalise details of an emergency aid package to help companies weather the virus-linked downturn.

$1 = 0.9814 Swiss francs Reporting by Oliver Hirt, writing by John Miller; Editing by Michael Shields

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