S&P upgrades X5 Retail, bond to BB-

Standard & Poor's said it raised its long-term corporate credit ratings on X5 Retail Group NV and its subsidiary OOO X5 Finance to BB- from B+.

The outlook is stable.

At the same time, the agency raised its issue rating on X5 Finance's senior unsecured ruble bond to BB- from B+. The recovery rating remains at 3, at the higher half of range, reflecting an expectation of meaningful recovery (50%-70%) in the event of a payment default.

S&P said the upgrades reflect X5's improved operating performance and credit metrics over the past couple of years, following a management shake-up in 2013. The agency thinks that the group should be able to sustain similar or stronger operating performance and credit measures over the next two years, despite ongoing difficult economic conditions in Russia, given the underlying robust demand for food products and relatively subdued competition.

S&P also noted that a more disciplined financial policy over the past four years, especially in terms of acquisitions, together with its expectation that X5 will pursue this financial discipline, have supported the upgrade.

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