Fitch affirms Steinhoff

Fitch Ratings said it affirmed Steinhoff International Holdings Ltd.'s national long-term rating at A-(zaf) and national short-term rating at F2(zaf).

The outlook for the long-term rating is stable.

The affirmation follows Steinhoff's agreement with PPR SA to acquire 99.8% of the share capital of Conforama Holdings SA, according to the agency.

Despite the fact that Steinhoff's leverage profile will slightly weaken due to the additional acquisition debt to be incurred to partially fund the acquisition, the consolidated group's credit profile will normalize at levels consistent with the current rating by fiscal year-end 2012, according to the agency.

Adjusted net leverage is expected to peak at 3.8x in fiscal 2011, but to normalize below 3.4x in fiscal 2012 and be sustained around 3x over the medium term.

Furthermore, the acquisition will improve Steinhoff's scale and geographical diversification, and boost the groups' EBITDA and cash generation, the agency said.

The rating remains constrained by continuing high adjusted leverage levels relative to its rating peers, calculated as adjusted net debt to operating EBITDAR, which improved to 3.3x at fiscal year-end 2010, Fitch noted.

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