S&P lowers Li & Fung

S&P said it lowered its ratings on Li & Fung Ltd. and its senior unsecured notes to BB from BB+ and its subordinated perpetual hybrid securities to B from B+. The recovery rating on the senior unsecured notes is unchanged at 3.

“The reversal in Li & Fung's operating performance in 2023 was unexpected. The company's revenue declined 19.3% in 2023, compared with our initial expectation of flat revenues. High inventory levels amid slow sell-through resulted in weak initial orders from many retailers in the first half of 2023. In the second half of 2023, the declining pace of turnover has slowed. We had expected Li & Fung's operating performance to continue to improve after the company built some momentum in revenues and profits in 2021 and 2022,” S&P said in a press release.

The agency noted Li & Fung has the financial strength to weather weakness in EBITDA and repay the $313 million in notes due in August 2025. Also, the company has been repaying its debt, which has lowered its interest expenses.

The outlook remains stable.

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