A Case Study on the Credit Rating Impact of Coronavirus

In their most recent results statement Next plc provided a range of stress scenarios of the impact on their business of Covid-19 and the policies to suppress it.  To the best of our knowledge, Next was the first company to share their scenario planning with investors and they deserve praise for doing so.  Next is a profitable business, which we think to be both well governed and one of the best managed companies in the UK.

The purpose of this note is to take those scenarios and the various mitigations proposed by Next to see what they imply for its balance sheet and its credit quality. We build on our more general note, which discussed the extent of credit downgrades and defaults that one might expect if Covid-19 were assumed to be a 1 in a 100 year event.


Read the full report here