Moody's Investors Service said buyout companies would be looking to make deals with European retailers in a bid to capitalize on the low funding costs. The buyout companies would be using non-investment grade debt to make the acquisitions. In a report, Moody's European retail analysts said around two thirds of monies raised for buyouts were high-yield. Moody's said the trend would continue for as long as borrowing costs stayed low.
European central banks had reduced interest rates to record lows as businesses and consumers dealt with the effects of the debt crisis and record breaking unemployment rates. Sales for retail businesses in the region and the UK would post a growth of 1% by the second half of next year. This would be supported by modest growth of the gross domestic product, Moody's said. The slow and uneven recovery would impact the earnings of French hypermarket operator Carrefour and electronics firm Dixons Retail.
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