Fitch Downgrades Signet To BB From BB-plus

By Ciara Linnane Markets MarketWatch Pulse

Fitch Ratings downgraded Signet Jewelers Ltd.'s to BB from BB-plus on Thursday, moving it further into junk territory, just hours after the retailer reported weaker-than-expected quarterly earnings. The move "results from ongoing weak operating trends, lower-than-expected debt reduction following the proposed partial sale of Signet's consumer financing business and the company's updated financial policy, all of which combine to yield expectations of leverage trending above 4.0x in the medium term," Fitch said in a statement. Signet also announced plans to outsource its credit portfolio over time, beginning with the sale of $1 billion of prime receivables to Alliance Data Systems Corp. . The company will use the proceeds of that sale to repay an ABS facility of $600 million and for share buybacks. Fitch said it expects the loss of financing income and the costs of outsourcing to reduce annual EBITDA by about $50 million, which is half the total that the financing business generates. Signet shares were down 1.3% and are down 43% in 2017, while the S&P 500 has gained 7%.

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