Fitch Downgrades Tiffany & Co. To 'BBB'; Rating Watch Revised To Evolving
International rating Agency Fitch downgraded the long-term Issuer default rating (IDR) of the American jewelry house Tiffany & Co. by one notch, to "BBB," with the forecast "evolving," the Agency said in a release.
"Fitch lowered the IDR of Tiffany & Co. from "BBB+" to "BBB" due to concerns about the company's operating activities in the medium term, arising from the coronavirus pandemic and its impact on non-daily consumer spending during 2021," the Agency explains the rating action.
Fitch also forecasts a sharp increase in the company's adjusted leverage due to lower EBITDA.
At the same time, the Agency notes that the current rating of Tiffany reflects the company's strong position in the field of premium jewelry, the status of a "cult" brand, a solid portfolio of real estate assets, and relatively limited competition in the market.
The "evolving" forecast reflects, according to the Agency, uncertainty about the results of the company's merger with LVMH (Moet Hennessy — Louis Vuitton). "This (rating action) followed LVMH's statement that it would not complete the acquisition due to the requirements of the French authorities," Fitch explains, specifying that Tiffany sued LVMH to complete the merger following the agreement.
LVMH agreed to buy Tiffany in late November for $16.2 billion ($135 per share). The merger agreement provided for an initial completion date of August 24, 2020, which, as the parties agreed at the time of signing, would provide more than enough time to obtain all necessary regulatory approvals. But in early September, Tiffany & Co. put forward a claim to the French LVMH for the delay in this process. After that, LVMH came forward with a desire to bring a counterclaim against Tiffany.
Fitch Ratings has downgraded Tiffany & Co's Long-Term Issuer Default Rating (IDR) to 'BBB' from 'BBB+' on medium term operating concerns stemming from the coronavirus pandemic and its impact on global consumer discretionary spending through 2021. The Rating Watch has been revised to Evolving , reflecting uncertainty regarding the outcome of the November 2019 acquisition proposal by LVMH Moët Hennessy Louis Vuitton SE. This follows LVMH's announcement that it will not complete the acquisition, due to the French government's requirements for LVMH to delay the acquisition beyond the agreed-upon closing timeline. Tiffany has responded by suing LVMH to complete the transaction per the merger agreement.