S&P upgrades Safilo

Standard & Poor's said it raised Safilo SpA's corporate credit and senior secured bank loan ratings to BB- from B, the recovery rating on the group's senior secured facilities to 2 from 3 and Safilo Capital International SA's subordinated debt rating to B from CCC+. All ratings were removed from CreditWatch, where they were placed with positive implications on Nov. 18. The outlook is stable.

S&P said the upgrade and CreditWatch removal reflect Safilo's much enhanced financial profile following a €295 capital increase, as well as expectations that the loss of the Polo Ralph Lauren license will be compensated by robust organic growth.

Proceeds from the capital increase were used to repay debt including €105 million of Safilo's 9.65% bond and €179 million of bank debt, shrinking debt to about €479 million at the end of 2005 from €807 million previously.

This substantial debt reduction has eliminated near-term liquidity problems and will considerably reduce the group's interest burden and enhance cash flow generation, the agency said. Pro forma for the significantly reduced new interest expenses, the company's adjusted funds from operations to net debt will be close to 17%.

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