Moody’s Investors Service have downgraded the issuer rating and senior unsecured notes one notch leaving the outlook as negative. Standard & Poor’s on the 28th February announced no immediate ratings impact from the Master’s write downs and first half 2016 results, although the negative outlook on the group remains. As a result Woolworths now have a split rating difference of one notch between the two rating agencies. While both rating agencies still have Woolworths as an investment grade credit at the issuer level, more work will have to be done to ensure that this remains the case as further credit rating downgrades will move them closer to a non-investment grade rating. Woolworths is highly liquid with more than enough capacity to deal with future redemptions via cash on balance sheet and unused bank facilities. Management is making good progress on its transition to a leaner retail business model and expects that investments in price, service and experience will exceed cost reductions in the full year results for 2016. This means it will take time for sales to respond to these company initiatives even when Woolworths has closed the price gap to Coles. Management expects capital expenditure to be down in the coming year but the full cost of business transformation is still unknown.