S&P: DFS Furniture notes B

Standard & Poor's said it affirmed the B corporate credit rating on DFS Furniture Holdings plc.

The agency also said it assigned a B rating to its proposed £310 million senior secured notes. The recovery rating on these notes is 3, indicating 50% to 70% expected default recovery.

The outlook is stable.

The agency also said it will withdraw the existing B+ rating and 2 recovery rating on the company's existing senior secured notes when the proposed transaction closes.

The affirmed corporate credit rating follows the company's proposed dividend recapitalization for £310 million, reflecting a view that the refinancing will not alter the company's highly leveraged financial risk and fair business risk profiles, S&P said.

The proceeds will be used to repay existing £191 million notes and distribute a dividend to its shareholders, the agency said.

Advent International Corp., which owns the majority of the company's share capital, might use about £113 million of the dividend proceeds to reduce the outstanding balance of the preference shares, S&P said.

The company has a highly leveraged capital structure and significant operating lease commitments and specific preference shares that are considered debt, the agency said.

On the positive side, its liquidity is considered adequate and it has no near-term refinancing needs, S&P added.

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