Moody's upgrades Office Depot

Moody's Investors Service said it upgraded Office Depot, Inc.'s corporate family rating to Ba3 from B1, probability of default rating to Ba3-PD from B1-PD, senior secured rating to Ba3 from B1 and various senior unsecured industrial revenue bonds to B1 from B3.

The speculative grade liquidity rating is SGL-1 and the outlook is stable.

The upgrades reflect the company's prudent financial policy as it continues its transformation to a business-services company, Moody's said.

The company's operating results have exceeded projections with a debt-to-EBITDA ratio of 3.2x comparied to an estimate of 3.5x, the agency said.

Pursuant to a proposed bank amendment, the company will use excess cash to make a permanent debt repayment of $194 million and reduce its interest margin by at least 150 basis points, Moody's said.

The company's improving sales trends in the business solutions division have more than offset continued declines in the retail segment, the agency added.

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