NEW YORK, Feb 2 (Reuters) - Moody’s Investors Service said on Monday it may cut its ratings on Macy’s Inc (M.N) into junk territory after the department store operator announced a significantly lower earnings forecast for 2009.
Macy’s said on Monday it expected to earn 40 cents to 55 cents a share, excluding restructuring costs, for fiscal 2009, below the average analyst view of 79 cents per share, according to Reuters Estimates.
The company will also slash about 7,000 jobs and cut its quarterly dividend in an attempt to preserve cash. For details, see [ID:nN02458041].
“Given the company’s high debt load, we believe that this earnings level makes it unlikely that the company will be able to maintain credit metrics appropriate for an investment grade company,” Moody’s said in a statement.
The company is also likely to break leverage and interest rate coverage ratios that are needed for its credit rating, the rating agency added.
Leverage is a measure of debt to earnings before interest, taxes, depreciation and amortization.
Macy’s had $8.75 billion in long-term debt as of Nov. 1, 2008, according to a regulatory filing.
Downgrades into junk territory can significantly increase a company’s borrowing costs.
Reporting by Karen Brettell;