Seven&i Holdings Co. Ltd.

S&P Global Ratings acknowledges a high degree of uncertainty about the extent, outcome, and consequences of the military conflict between Russia and Ukraine. Irrespective of the duration of military hostilities, sanctions and related political risks are likely to remain in place for some time. Potential effects could include dislocated commodities markets -- notably for oil and gas -- supply chain disruptions, inflationary pressures, weaker growth, and capital market volatility. As the situation evolves, we will update our assumptions and estimates accordingly. See our macroeconomic and credit updates here: Russia-Ukraine Macro, Market,&Credit Risks. Note that the timing of publication for rating decisions on European issuers is subject to European regulatory requirements. The negative outlooks on the Seven&i

...Seven & i Holdings Co. Ltd.'s financial recovery may gain momentum if the sale of its department store business goes ahead. Media reports have stated that Seven & i will sell its majority stake in its department store operating company, Sogo & Seibu Co. Ltd. We expect Seven & i's debt-to-EBITDA ratio will recover to 3.0x at the end of fiscal 2022 (ending Feb. 28, 2023), about one year earlier than our current assumptions, if it sells Sogo and Seibu for more than Ñ200 billion on an enterprise value basis as reported, and uses the proceeds to improve its financial profile. For the debt-to-EBITDA ratio, 3.0x is a threshold at which we may consider an upward revision of the outlook for our long-term issuer credit rating. In fiscal 2020, Seven & i's department store business incurred operating losses of Ñ6.2 billion. Its bank borrowings stood at Ñ146.2 billion at the end of fiscal 2020. S&P Global Ratings expects Seven & i Holdings' cash flow leverage ratios will remain weak for the current...

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