S&P rates Debenhams notes B

Standard & Poor's said it assigned its BB- long-term corporate credit rating to Debenhams Finance Holdings plc. The outlook is stable.

At the same time, S&P assigned its B debt rating to the proposed £325 million contractually subordinated senior notes to be issued by Debenhams.

"The group's ratings reflect its leveraged financial profile, partially offset by its significant free cash flow generation, well-established position, and consistent operating performance in the competitive U.K. department store sector," said S&P credit analyst Hugues De La Presle.

Following its leveraged buyout in December 2003 and the pending one-off payout of a £130 million shareholder distribution, Debenhams has substantial leverage. Debt to earnings before interest, taxes, depreciation, amortization, and rents (EBITDAR) is projected to be greater than 4.0x for the 12 months to August 2004, while pro forma EBITDAR coverage of interest plus rents is expected to be about 1.8x.

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