S&P upgrades Office Depot de Mexico to BB+

S&P said it raised its corporate credit rating on Office Depot de Mexico, SA de CV to BB+ from BB.

The outlook is stable.

S&P said the upgrade reflects Office Depot de Mexico’s early redemption of its $350 million senior unsecured notes due 2020, which bolstered its leverage metrics and capital structure, and eliminated foreign currency mismatch because almost all of its debt is now Mexican peso denominated.

The company funded the transaction through a $200 million capital injection from its shareholder, Grupo Gigante (unrated), a Ps. 3 billion credit facility and cash in hand.

The agency said it expects Office Depot de Mexico to maintain its debt to EBITDA below 3 times and DCF to debt above 10% on a consistent basis. It also expects the company to fund its expansion program mainly through internal cash flow generation.

The action also incorporates S&P’s view of Grupo Gigante’s improved credit risk profile, resulting from stronger profitability and debt reduction.

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