Tesco Loses Final Investment-Grade Debt Rating After Record Loss

Tesco Plc lost the last of its investment-grade credit ratings, as Fitch cut the U.K. grocery leader to junk days after it reported a record annual loss.

Fitch’s action comes more than three months after similar moves by Moody’s Investors Service and Standard & Poor’s. The new rating of BBB- is one level below investment grade.

Tesco’s U.K. earnings are likely to remain “impaired and volatile” in the short term and the acceleration of plans to dispose of its non-core assets is a “key source” of deleveraging, Fitch said in a statement. The rating agency had previously resisted lowering its BB+ opinion.

Tesco gave little indication in this week’s results of how it will tackle 21.7 billion pounds ($33 billion) of debt, leaving open the future of businesses such as the Dunnhumby data-analytics unit, one of a number of disposal candidates. In January, the company began exploring strategic options for Dunnhumby, although has yet to announce any firm progress.

In a conference call this week, Chief Financial Officer Alan Stewart said that while Tesco has a business that “should” be trading at investment grade, he couldn’t give a timeframe on when the company would recover its ratings.

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