Furniture Brands International takes 2nd rating hit
Standard & Poor’s Rating Services has placed Furniture Brands International, the nation’s largest manufacturer of home furnishings, on its CreditWatch with negative implications.
That means S&P will review Furniture Brand’s credit rating to determine if it needs to be lowered.
“The CreditWatch listing reflects our expectation of continued softness in the company’s furniture businesses given a challenging retail environment, as well as credit protection measures that are below our expectations for the ‘BBB-’ rating,” said Rick Joy, S&P’s credit analyst.
The review follows an announcement by Moody’s Investors Service in February that it was lowering Furniture Brand’s debt rating to "junk" status, the agency's lowest investment-grade rating. Moody’s said the decision was made due to the deterioration in the furniture maker's margins and credit indicators.
While the announcement isn’t good news for the furniture industry, it probably won’t set off any alarms, said Andrew Brod, director of UNCG’s Office of Business and Economic Research.
“Even if some of this is due to a challenging furniture retailing environment, a lot of it is due to the particular problems inside Furniture Brands International,” Brod said.
The company has a lot of debt, but that wouldn’t be a big problem if they had some cash flow, Brod said. The problem is Furniture Brands has poor cash flow, which makes it in danger of not servicing its debt.
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