S&P ups Rent-A-Center

Standard & Poor's said it raised its ratings on Rent-A-Center Inc., including the corporate credit rating to BB+ from BB. The senior secured bank loan is rated BB+ and subordinated debt BB-.

The outlook is stable.

S&P said the upgrade is based on the company's improved operating performance and cash flow protection measures. EBITDA rose 30% to $423 million over the past two years, driven by same-store sales growth, better operating margins, new store openings, and acquisitions. The recent acquisitions of Rainbow Rentals Inc. and Rent Rite Inc. have strengthened the company's market position while eliminating significant competitors. Cash flow protection measures have also improved and are solid for the rating category, with EBITDA coverage of interest at 6.0x, compared with 4.7x in the prior year.

S&P said the ratings reflect Rent-A-Center's leading market position in the rent-to-own retail industry, moderate leverage, and adequate liquidity. These strengths are partially offset by the company's participation in the highly competitive and fragmented rent-to-own retail industry, and challenges in continuing its growth in the face of slowing same-store sales.

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