Lotte Shopping removes itself from Moody’s rating to avoid downgrade to junk bond

Moody’s Investors Service has removed South Korean retailer Lotte Shopping from rating scoreboard upon the request of the client fearing downgrade to a junk bond status would bode badly for its stock price already at record bottom and further scare away investors.

Moody’s Investors Service on Wednesday posted that it withdrew rating opinion of Baa3 on Lotte Shopping papers and their negative outlook, citing “business reasons.” Negative outlook preludes a downgrade action.

A Lotte Shopping official said the company has requested the credit ratings withdrawal because it does not have any plan of issuing foreign debt in near future. A credit rating agency withdraws its ratings if the subject company requests.

The withdrawal comes after Moody’s on Feb. 21 maintained Baa3 rating, one notch above speculative grade, for Lotte Shopping but lowered its outlook to negative from stable.

At that time, Yoo Wan-hee, Moody's Vice President and Senior Credit Officer in a statement said "The change in outlook to negative reflects our expectation that Lotte Shopping's financial leverage will remain elevated over the next one to two years, after weakening significantly in 2019."

"While the company's potential restructuring measures may lead to better profitability over the next two to three years, there are uncertainties and execution risks over such plans," Yoo added.

Market watchers suspect Lotte Shopping removed itself from credit rating score to ease jitters of its shareholders ahead of the general shareholders’ meeting on March 27.

The National Pension Service, holding a 6.10 percent stake in Lotte Shopping, recently hinted at taking part of the management affairs by changing its purpose of share ownership to general investment from simple investment.

Lotte Shopping’s stocks plunged 35.9 percent in a month mainly due to concerns over the retail industry that is largely challenged by e-commerce rivals. The stock’s fall has accelerated recently in line with global financial market routs triggered by the coronavirus crisis. On Thursday, the stock fell 13.57 percent to close at 60,500 won ($46.90), a new bottom.

Moody’s also cut the ratings for E-Mart Inc, the country’s largest supermarket chain, to speculative grade of Ba1 last month and also warned of further downgrade by assigning negative outlook.

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