S&P revises InRetail Consumer outlook to stable

Standard & Poor's Ratings revised its outlook on InRetail Consumer to stable from positive. At the same time, the agency affirmed its BB+ corporate credit and debt ratings on the company.

The outlook revision reflects InRetail’s somewhat weaker-than-expected operating and financial results due to a slowing economy in Peru, including lower consumption, which increased competition, and the depreciation of the Peruviansol, which hurt the company's cash flow generation due to its dollar-denominated debt.

However, during the second half of 2015, InRetail reduced its exposure to the dollar through hedges and partial repurchases of its $300 million senior unsecured notes, which mitigated the latter risk.

S&P stills expect that about 20% of InRetail’s debt will continue to be exposed to the dollar in 2016, which makes the company more vulnerable than investment-grade companies that are fully hedged or have lower or no exposure to the dollar, especially considering our expectations of a further depreciation on the sol during the year.

Nevertheless, S&P expects that InRetail will strengthen its EBITDA and cash flow generation in 2016 thanks to its solid market position, a stablesame store sales (SSS) growth, and competitive cost structure, which it can adjust. Therefore, S&P expects InRetail’s credit metrics will slightly improve, posting an average of debt to EBITDA below 3x and FFO to debt slightly above 20% during the next two years.

© 2015 Prospect News.
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