S&P lifts Royal Holdings, debt

S&P said it raised the long-term corporate credit rating on Royal Holdings Inc. to B from B-.

At the same time, the agency upgraded the rating on the company's first-lien senior secured debt to B from B-. The recovery rating remains 3, indicating an expectation for meaningful (50%-70%; rounded estimate: 50%) recovery in the event of a payment default.

S&P also raised the rating on the second-lien debt to CCC+ from CCC. The recovery rating remains 6, indicating an expectation for negligible (0%-10%; rounded estimate: 5%) recovery in the event of payment default.

S&P said the upgrade reflects its expectation for gradual EBITDA improvement for 2017 and 2018.

“In 2016, the company generated solid cash flow, and generated stronger EBITDA and profitability measures than we previously forecasted due to a favorable raw material pricing environment and improved product mix, combined with the company's focus on supply chain improvement initiatives,” the agency said in a news release.

“We believe the improved operating performance will result in a funds from operations (FFO) to debt ratio between 10% and 12%. Our expectations at the previous rating for this ratio was below 10%.”

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