Retailer J. Crew's Chapter 11 bankruptcy filing Monday "is likely the first of many companies to restructure in- or out-of-court in the next one to two years," S&P Global Ratings analysts warn in a new report.
Driving the news: J. Crew is the eighth debt-issuing retail and restaurant company to default on its debt this year, equaling the total from all of 2019 in just over four months, S&P notes.
- "We expect the economic shutdown and lingering social distancing behaviors to trigger a broad shakeout of retail," S&P Global Ratings analyst Sarah E. Wyeth writes in the report.
- "The industry needs to meaningfully reduce its physical footprint and rapidly evolve to reach the post-pandemic consumer."
What's happening: Ratings agencies S&P, Fitch and Moody's have been slashing retail companies' credit ratings as their debt levels rise and income streams dry up because of the coronavirus pandemic.
- About 30% of the approximately 125 issuers S&P rates in the retail and restaurant sectors now hold credit ratings that imply at least a 1-in-2 chance of default.
It gets deeper: A record high 412 companies are now rated B3-negative or lower by Moody's, a rating equivalent to B- by S&P and Fitch, and well-below investment grade.
- That number is up from 311 last month and more than double the number of companies rated this low in 2019.
- It's also 42% above the high of 291 touched during the financial crisis, Moody's says.
Go deeper: Envision Healthcare considering bankruptcy