S&P ups Warner Music, rates notes BB

S&P said it upgraded its ratings on Warner Music Group Corp. and its senior secured debt to BB from BB-. The 3 recovery rating on the secured debt is unchanged.

Concurrently, S&P assigned a BB issue-level rating and 3 recovery rating to the company’s new senior secured notes comprising of a $535 million tranche and a €325 million tranche.

“The upgrade reflects our expectations that WMG’s adjusted leverage will decline to the low 4x area while discretionary cash flow (DCF) to debt will be above 10% on a sustained basis over the next 12 months. The deleveraging is driven by strong operating performance, particularly within digital streaming, and the company’s improved cost structure post the completion of its initial public offering (IPO),” S&P said in a press release.

The agency also raised the issue-level rating on the senior unsecured notes to BB- from B+; the recovery rating remains 5.

The outlook is stable.

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