Moody’s lifts HD Supply, loans, notes

Moody's Investors Service said it upgraded HD Supply, Inc.'s corporate family rating to Ba3 from B1, probability of default rating to Ba3-PD from B1-PD, senior secured term loans and senior secured notes to Ba3 from B1 and senior unsecured notes to B2 from B3.

The SGL-1 liquidity rating is affirmed and the outlook was changed to stable from positive.

Moody’s said the upgrade of the corporate family rating results from expectations of improved credit metrics, due to a combination of better earnings and debt reduction from free cash flow. Over the next 12 to 18 months, the agency projects revenues growing by 8% to about $8 billion, from $7.4 billion for 2016, and operating margins remaining around 11%, resulting in record levels of profitability.

Moody’s said it projects adjusted debt leverage nearing 3 times by year-end 2018 (ending Feb. 3, 2019) versus 4.1 times at fiscal year 2016 (ended Jan. 29, 2017).

The agency’s forward view focuses on deleveraging from earnings growth and debt reduction using free cash flow.

Adjusted interest coverage, defined as EBITA-to-interest expense, will continue to improve toward 4.5 times over the time horizon, the agency added.

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