Is Target‘s “A+” corporate credit rating at risk?
A new research report from Standard & Poor’s (for sale here and excerpted here) says a recent widening of the spread on the retailer’s credit default swaps may indicate that the credit rating is “off the mark.”
Credit default swap spreads are a measure of risk for insuring a company’s debt. Among the factors contributing to S&P’s concern: Target is more leveraged than other retailers, and in the past two years its margins have declined while its debt has increased.
In releasing its second-quarter results Tuesday, Target reported that margins improved in the past three months.