Debenhams shares slide as Moody's hands struggling retailer a negative outlook

Sebastian McCarthy
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Debenhams Facing Possible Job Cuts
Last week, the retailer said "constructive" talks have begun with lenders, and options include bringing new sources of funding (Source: Getty)

Debenhams’ share price slumped seven per cent in morning trading, after ratings agency Moody’s lowered its outlook for the beleaguered retailer from stable to negative.

Concerns over the risks that creditors might incur when lending to the embattled department store chain were flagged by Moody’s, pushing shares in Debenhams down 7.26 per cent to 2.8p this morning.

Read more: Debenhams' downward spiral shows no signs of abating

David Beadle, a Moody's vice president and lead analyst for Debenhams, said: "Today's change in outlook reflects our view that there is a risk that refinancing negotiations may not result in a timely and cost effective solution and thus the process could ultimately culminate in losses for financial creditors."

He added: "However, notwithstanding this and the company's elevated leverage we continue to view Debenhams liquidity profile as adequate for the time being."

Questions over the company’s prospects of accessing fresh capital have been raised throughout recent months following its dramatic fall in share price, which has plummeted nearly 90 per cent during the last year.

Last week, the retailer said that "constructive" talks had started with lenders, and future options include bringing in fresh sources of funding.

Read more: Shares in Debenhams dive as woes show no sign of abating

However, Debenhams’ attempts to avoid collapse suffered one its most damaging blows last week, as Sports Direct boss Mike Ashley, who controls a 30 per cent stake in the business, ousted chairman Ian Chesire and pushed chief executive Sergio Bucher off the board.

In October the chain reported losses of £491.5m, the largest in its history, and has seen its share price plunge almost 90 per cent during the last 12 months.