S&P ups Heckler & Koch GmbH, notes to CCC+

S&P said it raised its long-term corporate credit rating on Heckler & Koch GmbH to CCC+ from CCC.

The outlook is stable.

At the same time, the agency raised its issue rating on the company's senior notes to CCC+ from D and revised the recovery rating to 4 from 5, indicating an expectation of recovery in the lower half of the 30%-50% range in the event of payment default.

S&P said the upgrades follow its review of Heckler & Koch's performance after the company announced its nine-month results and changed its view regarding the recent and future bond buybacks.

“In the first three quarters of 2016, Heckler & Koch outperformed our previous base case due to solid revenue growth in both the military segment and the commercial market,” S&P said in a news release.

“Consequently, the company's EBITDA margin increased to about 24.7% on a reported basis as of the first nine months of 2016. This is a strong recovery compared to the levels reported at the end of 2015, when the company's operating performance was affected by changes in export license policies.

“Improved profitability reflects management's focus on process efficiencies and working capital management, and was not dampened by any large, extraordinary write-downs.”

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