More sombre news from DJ newswire: 2250 GMT - UBS thinks Moody's...

More sombre news from DJ newswire:

2250 GMT - UBS thinks Moody's cut to supermarket operator Woolworths's (WOW.AU) credit rating to two levels above junk creates capital constraints for the turnaround of its food and liquor business. "This puts increased pressure on management to arrest the like-for-like and margin declines in food and liquor (and Big W) more quickly, but with less capital to do so," UBS says. "As a consequence we believe pressure on credit metrics limit Woolworths's ability to invest more in price (if needed) and capex within grocery (if needed)." UBS currently forecasts a return to positive like-for-like sales within its food and liquor division in 1Q17. The key winners from this are Wesfarmers-owned (WES.AU) Coles supermarkets and Metcash (MTS.AU) because this reduces the risk of a Woolworths-initiated price war in the near term, the broker says. If Woolworths wanted to increase investment then management could look to implement an underwritten dividend reinvestment plan or a capital raising, but each of these are unlikely, UBS says. ([email protected]; @dwinningWSJ)
(END) Dow Jones Newswires
March 02, 2016 17:50 ET (22:50 GMT)