S&P: RONA Inc.'s Senior Unsecured Notes Upgraded To 'A-';
At the same time, S&P Global Ratings affirmed its 'BBB+' long-term corporate credit rating on RONA. The outlook is stable.
RONA recently announced that Lowe's Cos. Inc. (A-/Stable/A-2) has guaranteed RONA's preferred shares outstanding as well as the company's 5.4% debentures due Oct. 20, 2016.
"We base the upgrade on Lowe's guarantee of RONA's preferred shares and debentures outstanding," said S&P Global Ratings credit analyst Alessio Di Francesco.
In our opinion, this guarantee has enhanced the credit profile of these issues resulting in a one-notch upgrade. Our rating on RONA's senior unsecured debentures is now equalized with our 'A-' issue-level rating on Lowe's senior unsecured notes. Our 'BBB' global scale rating on RONA's preferred shares is two notches below our long-term corporate credit rating on Lowe's (guarantor). The notching incorporates our view that the preferred shares have an optional deferral feature and are subordinated to Lowe's debt outstanding.
The affirmation of our long-term corporate credit rating on RONA reflects our view that the company is a strategically important subsidiary of Lowe's, which results in a three-notch uplift to our 'bb+' stand-alone credit profile (SACP) on RONA.
The stable outlook on RONA reflects our stable outlook on Lowe's and our expectation that over our two-year outlook horizon, RONA's stand-alone business and financial risk profiles should be unchanged.
We could lower our rating on RONA within our two-year outlook horizon if we lower our rating on Lowe's or our SACP on RONA. The latter could occur if RONA's business or financial risk profiles deteriorate. We could also lower our rating if we believe Lowe's support of RONA will be diminished.
We could raise our rating on RONA within the two-year outlook period if we raise our rating on Lowe's and our SACP on RONA. We could also raise our rating if we believe Lowe's will support RONA to a greater extent.
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