The billionaire businessmen from Blackburn set to buy Asda have had their debt rating cut by credit agency Moody’s.
Mohsin and Zuber Issa, who built up their fortune from a single petrol filling station in Bury, Greater Manchester, were criticised for their “limited progress in terms of financial reporting and governance” following “large-scale” M&A activity in the last two years.
The agency downgraded EG Group’s corporate family rating (CFR) to B3 from B2 and its probability of default rating (PDR) to B3-PD from B2-PD.
It also downgraded to B3 from B2 and to Caa2 from Caa1 the ratings on EG’s first and second lien instrument ratings respectively of the debt issued by its subsidiaries EG Finco Limited, EG Global Finance plc., EG America LLC and EG Group Australia Pty Ltd.
The outlook on the ratings has been changed to stable from negative, Moody's said.
Moody's said the action “reflects Moody’s view of the company’s limited progress in terms of financial reporting and governance, with regards to internal controls and board composition, relative to its substantially increased scale and complexity following large-scale M&A activity in the last two years”.
“Moody’s understands that this has contributed to the recent resignation of its auditors and their replacement with new auditors.
“Moody’s also acknowledges that the group’s 2019 accounts received an unqualified opinion by Deloitte and understands that the appointment of KPMG as new auditor followed an extensive on boarding process, that there have been no accounting or auditing disputes between EG and Deloitte, and that Deloitte continues to audit the group’s Australian operations.”
A spokesperson for EG Group said: “We strongly disagree with Moody’s decision which, despite recognition of EG’s inherent strengths and progress on several fronts, we believe doesn’t reflect the continued, wide-ranging investment in strengthening the business and the significant progress made over the last 12 months.
“We look forward to providing our investors with a further update on that progress, along with our record third quarter performance, next month.”
S&P last week (October 20) maintained its outlook and rating for the group.
S&P Global Ratings said EG Group’s “positive year-to-date performance provides breathing room to service debt but leverage remains high. As such, our ratings and outlook on EG Group”.
