S&P changes KKR Retail to negative

Standard & Poor's said it revised its outlook on KKR Retail Partners Midco Sarl, the majority owner of Groupe SMCP, to negative from stable.

At the same time, the agency affirmed its B long-term corporate credit rating on the company. It also affirmed the B issue rating on KKR Retail Partners' €290 million senior secured notes. The recovery rating on these notes was revised to 4 from 3.

S&P said the outlook revision follows the material deterioration in SMCP's free operating cash flow in 2014, partially owing to a sizable increase in inventory and head office staff.

Although it acknowledges SMCP's solid performance in the first quarter of 2015, the agency sees a risk that the anticipated growth in EBITDA, monitoring of working capital needs and capital spending, and lower tax payments might not be sufficient to generate a positive net cash flow from 2015.

This is in a context of further cash-consuming network expansion and ongoing challenges in the mature French market, where SMCP still generates nearly 60% of its revenues, S&P said.

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