S&P rates L Brands notes BB, B+

S&P said it assigned a BB issue-level and 1 recovery ratings to L Brands Inc.’s proposed $750 million of senior secured notes. The 1 recovery rating indicates S&P’s expectation for very high (90%-100%; rounded estimate: 95%) recovery in the event of a payment default.

The agency also assigned a B+ issue-level and 4 recovery ratings to the company’s proposed $500 million of guaranteed senior unsecured notes. The 4 recovery rating indicates an expectation for average (30%-50%; rounded estimate: 30%) recovery.

S&P said it revised the recovery rating on the company’s outstanding guaranteed senior unsecured debt to 4 from 3 because the added senior secured debt reduces recovery prospects for unsecured claims, as well as the updated assumptions for the enterprise value of L Brands in a bankruptcy scenario, the agency.

The B- ratings on the unsecured notes without subsidiary guarantees are unchanged. The recovery ratings remain 6, indicating an expectation for (0%-10%%; rounded estimate: 0%) recovery.

“The B+ issuer credit rating is unchanged, and it reflects our expectation for L Brands to reduce leverage to below 5x by fiscal 2021, despite the proposed debt issuances and termination of the agreement with private equity firm Sycamore Partners to purchase a 55% controlling interest in Victoria’s Secret,” S&P said in a press release.

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