S&P ups Smart & Final loans

Standard & Poor's said that it affirmed the B- corporate credit rating on Smart & Final Holdings Corp. and raised the issue-level rating on the company's outstanding first-lien term loan to B+ from B and revised the recovery rating on the debt to 1 from 2. The 1 recovery rating indicates very high (90%-100%) recovery.

S&P raised the issue-level rating on the second-lien term loan to CCC+ from CCC and revised the recovery rating to 5 from 6. The 5 recovery rating indicates modest (10%-30%) recovery.

The upgrades follow the company's use of net proceeds from the sale of Henry's Holdings LLC to pay down principal of its first-lien term loan and $6.5 million of its second-lien term loan, the agency said. As a result, both first- and second-lien term loan lenders have better asset coverage in S&P's simulated default scenario.

The ratings on Smart & Final reflect the company's less than adequate liquidity, given the upcoming maturity on the commercial mortgage-backed securities loan in 2012, the agency added.

The ratings consider the assessment that the retailer's financial risk is highly leveraged, given its high debt levels, weak credit protection measures and very aggressive financial policies, S&P said.

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