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S&P upgrades Michaels
S&P said it raised its ratings for Michaels Cos. Inc. and its term loan and senior secured notes to B- from CCC+. The recovery rating remains 3. It also raised the issue-level rating on the company's senior unsecured notes to CCC from CCC. The recovery rating remains 6.
“The upgrade reflects Michaels' better-than-expected operating margin and FOCF despite ongoing sales pressures. Lower transportation costs, higher product margins, and reduced store labor enabled Michaels to expand S&P Global Ratings-adjusted EBITDA margin by more than 350 basis points (bps) in 2023,” the agency said in a press release.
The agency noted Michaels' generated reported FOCF of $136 million in 2023, up from a cash deficit of $255 million in 2022. S&P forecasts leverage hovering in the low- to mid-5x area this year as debt and adjusted EBITDA levels stay “roughly flat.”
The outlook is stable.
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