S&P upgrades Matalan, notes

S&P said it raised the long-term corporate credit rating on Missouri Topco Ltd., the holding company for Matalan, to CCC+ from CCC.

The outlook is stable.

At the same time, the agency upgraded the long-term issue ratings on Matalan's £342 million first-lien notes to CCC+ from CCC, in line with the corporate credit rating. The recovery rating remains 4, reflecting an expectation of average recovery (30%-50%; rounded estimate: 45%) in the event of default.

S&P also raised the long-term issue ratings on the group's £150 million second-lien notes (of which £138 million remains outstanding) to CCC- from CC. The recovery rating is unchanged at 6, indicating an expectation of negligible recovery in the event of default.

Matalan recently reported significant improvements in operating performance in financial 2017 (ending Feb. 25), underpinned by significant improvements in earnings and EBITDA margins, resulting in material free operating cash flows (FOCF). These positive results have seen the prices of Matalan's first- and second-lien notes materially increase, and they now trade at 94% and 91% of par respectively, S&P explained.

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