Yesterday Moody's downgraded QVC, Inc once again marking yet the fifth ratings downgrade for QVC this year if we combine FITCH and S&P (FITCH 2x, Moody's 2x, and S&P 1x).
Below is the statement from Moody's:
"Moody's Ratings downgrades Liberty Interactive LLC's corporate family rating to Caa3, outlook negative
New York, October 06, 2025 -- Moody's Ratings (Moody's) today downgraded Liberty Interactive LLC's ("Liberty Interactive") corporate family rating (CFR) to Caa3 from Caa1, its probability of default rating (PDR) to Caa3-PD from Caa1-PD and its senior unsecured ratings to C from Caa3. The speculative grade liquidity rating (SGL) of Liberty Interactive was downgraded to SGL-4 from SGL-3. We also downgraded the ratings of the senior secured notes issued by QVC, Inc. to Caa3 from Caa1. The outlook for both issuers was changed to negative from stable.
The downgrades reflect governance considerations including the company's large debt load with our expectation of leverage of about 7.5x by year-end 2025 and the refinancing risk associated with its almost fully drawn $3.25 billion revolving credit facility due October 2026. The downgrades also reflect the significant deterioration in Liberty Interactive's operating performance in 1H'25 caused by accelerating cable cord-cutting, falling customer count and lower customer engagement. We expect these trends to continue as the company contends with secular pressures to its core business, an uncertain demand environment for discretionary products and an expectation for elevated costs associated with higher tariffs. Liberty Interactive's businesses are highly dependent on imported product including a material (though reducing) level of imports from China.
"A comprehensive review of all credit ratings for the respective issuer(s) has been conducted during a rating committee."
The negative outlook reflects our expectation that given the large amount of maturing debt, weak operating performance expectations and limited sources of repayment, a restructuring of the company's capital structure is likely.
RATINGS RATIONALE
Liberty Interactive's Caa3 corporate family rating reflects its high leverage, weak liquidity and refinance risk associated with its nearly fully drawn $3.25 billion revolver which expires in October 2026. It also reflects the difficulties the company is facing as it seeks to stabilize its revenue and EBITDA levels in an uncertain demand environment for discretionary products and faces cost pressures associated with tariffs. Liberty Interactive, through its parent QVC Group, Inc. ("QVCG") is also contending with secular pressures that include a growing number of consumers who are canceling their cable subscriptions which is weighing on customer count, increased price transparency and shorter product life cycles. Nonetheless, QVCG continues to have a substantial position within online shopping and is continuing to focus on increasing streaming to widen its customer reach.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be upgraded if there is a sustained improvement in operating performance which leads to positive free cash flow generation and an improvement in credit metrics, lessening the overall likelihood of default and the expected recovery rate improves. An upgrade would also require a successful extension of its revolver's October 2026 expiration date and an ability to address its other debt maturities in a timely manner.
The ratings could be downgraded if the company were to default on its debt or if recovery expectations deteriorate further.
Headquartered in West Chester, Pennsylvania (recently moved from Englewood, Colorado), Liberty Interactive LLC, is a wholly owned subsidiary of its parent QVC Group, Inc. ("QVCG"), formerly named Qurate Retail, Inc. QVCG operates the QVC, HSN and Cornerstone Brands. Our credit analysis considers the consolidated QVC Group organization and all credit metrics quoted are at the QVC Group level. QVC, Inc. was founded in 1986 and has operations in the US, UK, Germany, Japan and Italy. Annual revenue at QVC Group, Inc. was about $9.6 billion for LTM period ended June 30, 2025.
The principal methodology used in these ratings was Retail and Apparel published in September 2025 and available at ratings.moodys.com. Alternatively, please see the Rating Methodologies page on ratings.moodys.com for a copy of this methodology.
Liberty Interactive's Caa3 CFR is set four notches below its scorecard-indicated outcome of B2 which reflects the company's significant refinancing risk and possibility of a capital structure restructuring. The differential also reflects our expectation of a continuation of financial performance weakness which will erode credit metrics and liquidity."
- March 7th, 2025: Fitch downgrades QVC to B- from B
- May 21st, 2025: Moody's downgraded QVC, INc from B2 toCaa1.
- May 23rd, 2025: QVC Group suspended paying QVCGP dividend.
- May 27th, 2025: Greg Maffei chairman agreement extended. The Employment Agreement provides for an initial term expiring December 31, 2025, which will be automatically extended through December 31, 2026 unless a notice of nonrenewal is provided by either party at least 30 days prior to December 31, 2025, or Mr. Maffei’s employment with the Company ends before such date (such period of employment, the “Term”).
- May 28th, 2025: QVC hired Evercore, Inc and Kirkland & Ellis and senior holders hired PJT Partners and David Polk & Wardell
- LITNA holders hired Centerview and Akin Gump Strauss Hauer & Feld
- May 30th, 2025: Fitch downgraded QVC again going from B- to CCC+.
- June 20th, 2025: QVC hired Roger Meltzer of DLA Piper and Carol Flaton to the board paying each $50K a month.
- August 7th, 2025: Earnings released and revenue further disappointed. Revolver had $75M drawn in addition. It was also reported after earnings period company borrowed another $975M on the revolver bringing total borrowings to $2,900M.
- August 13th, 2025: QVC credit syndicate got 75% together and hired Simpson Thacher & Bartlett.
- August 15th, 2025: Company adjusted executive compensation which mirrors a KERP/KEIP plan.
- August 26th, 2025: S&P downgraded QVC from CCC+ to CCC.
- September 26th, 2025: QVC amended and restated certificate of incorporation for QVC, Inc and amended and restated By-Laws of QVC, Inc. Paul Keglevic (part of Rite Aid and Envision bankruptcy) and Jill Frizzley (president of Wildrose Partners and oversaw governance prior to bankruptcy filings).
- October 6th, 2025: Moody's downgraded QVC, Inc from Caa1 to Caa3.
Happy Investing,
Sean |
