OREANDA-NEWS. S&P Global Ratings said today that it raised its long-term corporate credit rating on France-based decoration and furniture retailer Magnolia (BC) S. A. (Maisons du Monde) to 'B+' from 'B'. At the same time, we removed the rating from CreditWatch with positive implications, where we placed it on April 25, 2016.

We subsequently withdrew the long-term rating at Maisons du Monde's request.

The outlook was stable at the time of the withdrawal.

The upgrade follows Maisons du Monde's successful listing on the Euronext Paris Stock Exchange. Maisons du Monde raised €160 million from newly issued shares; with an additional €220 million sold by shareholders Bain Luxco and Compagnie Marco Polo after the over-allotment option was exercised, bringing the total offer to about €380 million. Maisons du Monde used the proceeds to repay its €325 million high-yield bond. All preferred equity certificates (PECs) and related interest were also converted to equity in the transaction.

The company also put in place new senior credit facilities with a pool of banks, providing Maisons du Monde with a €250 million term loan and €75 million revolving credit facility. As a result, we now forecast reported debt to EBITDA to reduce to less than 3x in the fiscal year ending Dec. 31, 2016 (about 4x on an S&P Global Ratings-adjusted basis). Despite the improvement in leverage, our view of Maisons du Monde's financial risk profile remains constrained by its controlling ownership by a financial sponsor, Bain Capital. Prior to withdrawal, we revised our assessment of Maisons du Monde's financial policy to the FS-5 category (a one-category improvement from our previous FS-6 assessment). This primarily reflected that the reduction of debt and of the private equity sponsors' shareholdings should, in our opinion, lead the company to pursue a more moderate and predictable financial policy, particularly with respect to shareholder returns. It also reflected that no clear timeframe has yet been provided for when Bain Capital may ultimately relinquish control, and we do not currently anticipate this to occur in the near-to-medium term.

Finally, our 'B+' rating also incorporated our view of Maisons du Monde's limited scale, minimal diversity relative to broader sector peers, and a limited financial policy track-record since becoming a publicly listed company.

At the time of the withdrawal, we assessed Maisons du Monde's liquidity as adequate. Based on our current forecasts, following the IPO and debt reduction, we expected sources of liquidity to exceed uses by more than 1.2x over the following 12 months. This assessment reflects Maisons du Monde lack of short-term debt maturities and the significant headroom under its covenants under the new credit facilities.