Today’s game-changer: Moody’s just downgraded Tesco to ‘junk’

There was more bad news for embattled Tesco today, after it emerged that credit rating agency Moody’s had downgraded the supermarket to ‘junk’ status.

150109-tesco

Tesco met the main credit rating agencies on Wednesday to try to avoid a downgrade

What happened?

Tesco

(LSE:TSCO)

Following the announcement of brutal cuts, shares closed at 209.25 yesterday, up 15%, the largest single-day rise in 27 years. Tesco's surge dragged the FTSE 100 up 2.34%, adding £3bn of value to the index by the day's close.

So what's the problem?

"We have downgraded Tesco's ratings because structural changes in the UK grocery retail market will continue to challenge the company's operating performance even with the benefits of the significant restructuring actions."

"Moreover, we think that the company's efforts to stabilise the UK operations and to protect the balance sheet, while helpful, will take time to implement."

What did the commentators say?

said the Telegraph

Tesco also came under fire from Pat McFadden, MP for the deprived Wolverhampton South East constituency. The area is one of 49 in which Tesco have abandoned plans to build new outlets.

"This decision is a betrayal of the people of Wolverhampton and a clear breach of the promise made to the people of the city." said McFadden. "Less than a year ago, the UK managing director of Tesco gave a pledge on behalf of the company that this investment would go ahead in the coming financial year.

What next?

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