S&P ups HD Supply ratings

Standard & Poor’s said it raised its corporate credit rating on HD Supply Inc. to BB- from B+. The outlook is positive.

At the same time, the agency raised the issue-level ratings on the company’s $1.5 billion asset-based lending credit facility to BB+ from BB. The 1 recovery rating on the facility indicates an expectation of very high (90%-100%) recovery in the event of a default.

In addition, S&P raised the issue-level ratings on the company’s senior secured debt to BB from BB-. The 2 recovery rating indicates an expectation of substantial (70%-90%; upper half of the range) recovery in the event of a default.

S&P also raised its issue-level ratings on the company’s unsecured notes to B from B-. The 6 recovery rating indicates an expectation of negligible (0%-10%) recovery in the event of a default.

“The positive outlook reflects the one-in-three chance of an upgrade, supporting our expectation that HD Supply’s operating performance and EBITDA will continue to improve coupled with further deleveraging,” said S&P credit analyst Liley Mehta in a news release.

“We expect that relatively favorable industry conditions and improving margins will enable the company to generate free cash flow of $300 million or more annually and reduce its debt.”

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