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Bond Market News

L Brands Upgraded To BB- from B+ By S&P

American fashion retailer L Brands’ credit rating was upgraded by S&P to BB- from B+. The credit rating agency stated that L Brands plans to repay around $1bn of debt, and that its earnings guidance have been raised for the first quarter of 2021 with higher-than anticipated sales and profit margins. With the debt repayments and revised earnings guidance, S&P expects leverage to move to the low 2x area as it gives enough headroom in credit metrics to absorb ‘potential volatility’ caused by the pandemic.

L Brands announced via a call a repayment of $1.035bn of their $285mn outstanding 2022s, and $750mn of secured 2025s. A new $500mn share repurchase program has also been implemented along with a reinstatement of an annual $0.60 dividends per share, totaling around $170mn. It also added that L Brands has sustained improvement at the Victoria’s Secret unit for several quarters, and that it is unlikely to turn significantly negative throughout the next year. The stable outlook reflects S&P’s expectation that leverage will prevail comfortably under 3x and that the overall performance of L Brands will continue positive throughout 2021. They said they could lower the ratings if leverage goes above 4x.

L Brands dollar bonds were slightly lower, with its 5.25% 2028s down 0.7 to 106.25, yielding 4.19% and its 6.75% 2036s down 0.5 at 117.5, yielding 5.09%.

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