S&P changes Hornbach Baumarkt view

S&P said it revised the outlook on Hornbach Baumarkt AG to negative from stable and affirmed the long-term issuer credit rating at BB+.

At the same time, the agency affirmed the BB+ rating on the group's €250 million senior notes due 2020.

The recovery rating is unchanged at 3, indicating an expectation of meaningful (50%-70%; rounded estimate: 65%) recovery prospects in the event of a payment default.

“The outlook revision reflects a view that the group faces weaker financial flexibility over the next year or two than previously anticipated,” S&P said in a news release.

“This follows Hornbach's soft first quarter results and increased discretionary investments into real estate planned for the current fiscal year, leading us to forecast weaker profitability and operating cash flows compared to fiscal 2018 levels.

“Consequently, we see an elevated risk that the group's free operating cash flow will be insufficient to cover dividends and amortization of financial liabilities in fiscals 2019 and 2020, resulting in more debt than we previously anticipated.”

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