S&P upgrades SMU to B-

S&P said it raised its long-term corporate credit and issue-level ratings on SMU SA y Filiales to B- from CCC+.

The outlook is positive.

The agency said it believes that the investors in SMU senior notes do nott face a significant disadvantage as creditors of the holding company, because the notes are guaranteed by operating subsidiaries that generate the bulk of SMU's consolidated EBITDA.

“The upgrade and positive outlook reflect our view of the improved capital structure and the expectation that the company will reduce leverage in the next two years,” S&P said in a news release.

“We believe the IPO concluded in January 2017 marks the end of a restructuring period started in 2014 in which the company focused on achieving a sustainable business model and financial structure by improving its operating efficiency and defining a commercial strategy.

“For the next two years, we expect management to keep up the efficiency initiatives and to increase store productivity to maintain more gradual but steady margin improvement, with modest capital investments. Amid these efforts, we forecast the company will generate excess cash to repay debt and gradually reduce its still high leverage,” the agency added in the release.

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