S&P lifts Debenhams to stable

Standard & Poor’s said it revised the outlook on Debenhams plc to stable from negative.

The agency also said it affirmed the BB- corporate credit rating and senior issue-level ratings.

S&P also affirmed the issue and recovery ratings of BB- and 3 on the company’s £225 million 5 ¼% senior notes due 2021. The 3 recovery rating indicates 50% to 70% expected default recovery.

The agency said it believes Debenhams will continue to moderately improve its operating performance and is likely to maintain a resilient competitive position.

The outlook revision also considers an expectation that the group will continue to moderately improve its margins and free cash flow generation, S&P said.

The modest improvement in profitability, offset by continued capital investment, should result in the group’s leverage ratio trending down on a reported basis, the agency said.

With that said, leverage is expected to remain at more than 5x, after accounting for substantial operating lease commitments, S&P said.

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