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With the Omicron variant hitting foot traffic and causing labor shortages, several banners are being closely watched by rating agencies for a potential default.

Why it matters: Fitch has previously said that the leveraged loan default rate for the retail sector was projected to fall to its lowest level since 2016.

Yes, but: Not all retail merchants are out of the woods, thanks to that swirl of factors.

State of play: Rating agencies are eyeing apparel retailers Tailored Brands (owner of Men's Wearhouse), Boardriders, J.Jill and Belk. They're also eyeing Isagenix, a multi-level marketer of dietary supplements, and discounter 99 Cents Only Stores.

  • These companies are rated either at or below Caa1 (Moody's), CCC+ (S&P) or appear on Fitch's "top market concern loans" watchlist.
  • For Moody's, a rating of Caa indicates "very high credit risk." To S&P, a CCC rating indicates vulnerability to and dependency on current economic conditions. To get on Fitch's watchlist, a number of negative factors need to be counting against you

The other side: "Tailored Brands continues to see positive momentum... We outperformed our business plan in the third quarter, delivering strong year-over-year revenue and EBITDA growth, and we remain incredibly optimistic about our trajectory as we enter the new year," the company said in an email.

  • Boardriders, a portfolio company of Oaktree Capital Management, and the parent company of action sports brands Quiksilver and Billabong, as well as department store chain Belk, a portfolio company of Sycamore Partners, declined to comment.
  • The other companies did not respond to a request for comment.
  • Note that J.Jill was upgraded by Moody's in October from Caa2 to Caa1 due to improved operating performance and positive EBITDA.

By the numbers: The leveraged loan default rate as of the middle of December, according to Fitch, was 4.4%, a major improvement from 16.7% at the end of 2020. The agency projects that rate to fall even further to 3% by the end of this year.

  • A default rate in the high single digits implies that a sector is distressed.

The bottom line: While challenges still abound for retailers, it's still too soon to tell what the ultimate impact of Omicron will be, according to David Silverman, a retail analyst at Fitch.

Go deeper

FDA limits use of Regeneron and Lilly COVID antibody treatments

A coldbox containing monoclonal antibody treatments at a Regeneron clinic in Pembroke Pines, Florida, in August. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

The FDA said Monday it's limiting the use of two monoclonal antibody therapies as COVID-19 treatments because data indicates they're "highly unlikely" to be effective against the dominant Omicron variant.

Driving the news: The FDA revised the authorizations for Regeneron and Eli Lilly "to limit their use to only when the patient is likely to have been infected with or exposed to a variant that is susceptible to these treatments," per a statement from the agency.

Updated 3 hours ago - World

Pentagon: 8,500 troops on high alert for possible deployment to eastern Europe

Photo: Anna Moneymaker/Getty Images

Defense Secretary Lloyd Austin has placed 8,500 U.S. troops on "heightened preparedness to deploy" to eastern Europe in case NATO activates its rapid-response force over tensions with Russia, the Pentagon announced Monday.

Why it matters: No decisions have been made to actually deploy U.S. forces, but the heightened alert level will allow the military to rapidly shore up NATO's eastern flank in the event that Russia invades Ukraine. The Pentagon warned that Russia has shown "no signs of de-escalating," and continues to amass troops on Ukraine's borders.

Updated 3 hours ago - Politics & Policy

Biden calls Fox News reporter a "stupid son of a b---h" on hot mic

President Biden blasted Fox News' Peter Doocy on Monday after the reporter asked if the nation's soaring inflation is a political liability, saying, "what a stupid son of a b----h."

The latest: The president called Doocy Monday evening, the reporter told Fox's Sean Hannity. "He cleared the air and I appreciated it. We had a nice call," Doocy said when asked whether the president apologized, adding: "I don't need anyone to apologize to me."