Moody's eyes L Brands for upgrade

Moody's Investors Service said it placed on review for upgrade L Brands, Inc.’s long term ratings including its Ba3 corporate family rating, its Ba3-PD probability of default rating, its Ba3 rating on the unsecured guaranteed notes and its B2 rating on the senior unsecured unguaranteed notes. The agency also revised the outlook to under review from stable. The speculative grade liquidity rating remains SGL-1.

The review for upgrade was prompted by L Brands' of its plan to separate its Victoria's Secret operations into an independent publicly traded company in a tax-free spinoff, Moody’s said.

Victoria's Secret is raising $1 billion in debt to fund a cash payment to L Brands.

“The review for upgrade also reflects Moody's view that the remaining Bath & Body Works business at L Brands has a history of consistently solid operating performance, which is expected to continue, as well as solid credit metrics and very good liquidity,” the agency said.

The review will focus on L Brand's final capital structure, as well as future governance considerations particularly its financial strategies, including its willingness to deleverage using excess cash on balance sheet including the about $1 billion dividend from newly formed Victoria's Secret.

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