Fitch affirms L Brands IDR at 'BB+'

12 Apr '14

3 min read

Fitch expects the company will continue to generate strong FCF before dividends in the $650 million - $750 million range annually (or $300 million - $350 million after regular dividends) over the next two to three years. Capex is expected to increase to $750 million in 2014 from $690 million in 2013 and $590 million in 2012, reflecting new store constructions and square footage expansion to primarily support PINK and international growth (square footage to grow by approximately 3% - 4% in 2014).

Liquidity is strong, supportedby a cash balance of $1.5 billion as of Feb. 1, 2014 and the company's $1 billion revolving credit facility. The company has a comfortable maturity profile, staggered over many years. Fitch considers refinancing risk low given L Brands' strong business profile, favorable operating trends, and reasonable leverage.

RATING SENSITIVITIES

A positive rating action would require both the continuation of positive operating trends and the maintenance of financial leverage in the low 3x on a consistent basis.

A negative rating action could be driven by a trend of negative comps and/or margin compression from fashion misses, execution missteps, or loss of competitive traction. A larger than expected debt-financed share repurchase and/or leverage rising to approximately 4x would be negative for the rating.

Fitch Ratings

More Limited Brands News... More Apparel/Garments News - United States Of America...