Moody's Places Signet (SIG) on Review for a Downgrade

Moody's Investors Service placed the ratings of Signet UK Finance plc (NYSE: SIG) on review for downgrade. The review is prompted by Signet's announcement that it has reached an agreement to outsource its prime credit card portfolio and that it intends to outsource its funding of its remaining subprime exposure which is in excess of 10% of its fiscal 2017 sales. The review will also consider its weak financial results relative to the jewelry category.

"Signet's extension of credit is integral to driving sales and its customer relationships particularly with its bridal customers" Moody's Vice President Christina Boni stated. "While the company has reach a favorable agreement to outsource the prime portion of its portfolio, there are potential costs and risks to outsourcing credit to its subprime customers on similar terms to those currently provided" Boni further stated.

Its prime portfolio is under agreement to be sold to Alliance Data Systems Corportion for approximately $1 billion. Use of net proceeds will be used to repay its $600 receivables securitization and the remainder will be used to repurchase common stock. The company has a preliminary agreement with Genesis Financial Solutions to outsource the servicing of its subprime portfolio as it explores options for funding of this portfolio which expected to be between $700- 800 million in October 2017. Both transactions are expected to close in October 2017.

RATINGS RATIONALE

Moody's rating review of Signet will consider if its proposed plans for its credit portfolio can meet its strategic need to provide credit to drive sales while not increasing risk. The review will also assess the counterparty and contractual risks as well as the economics of any new credit and/or servicing partners for Signet. Moody's will also assess the current weakness in the company's results which reflects pressure on its market position.

On Review for Downgrade:

..Issuer: Signet UK Finance plc

....Senior Unsecured Regular Bond/Debenture Placed on Review for Downgrade, currently Baa3

Outlook Actions:

..Issuer: Signet UK Finance plc

....Outlook, Changed To Rating Under Review From Negative

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