Moody’s upgrades Best Buy to Baa1

Moody's Investors Service said it upgraded all ratings of Best Buy Co., Inc., including the local-currency issuer rating and the senior unsecured ratings to Baa1 from Baa2.

The outlook is stable. This concludes the review for upgrade that commenced on June 16.

"The upgrade largely reflects the reduction in adjusted debt due to changes in Moody's approach for capitalizing operating leases, which reduced the lease multiple to 5 times from 8 times." Moody's vice president Charlie O'Shea said in a news release.

The updated approach for standard adjustments for operating leases is explained in the cross-sector rating methodology Financial Statement Adjustments in the Analysis of Non-Financial Corporations, published on June 15.

"As a direct result of this change, Best Buy's debt/EBITDA has reduced to under two times, while RCF/Net debt has increased to over 50% and EBITA/interest has improved to around 7.5 times. Best Buy continues its successful transformation into a true multi-channel retailer, and we believe the company will continue to benefit from its deep vendor relationships with world-class partners such as Samsung, Sony, Microsoft, Apple, and Amazon. Of note, Apple recently-selected Best Buy as the only non-Apple retailer to sell the Apple Watch, which we believe is a reflection of Best Buy's retail strength." O’Shea added in the release.

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