Wal-Mart to Help D&S with Debt

Fitch says that Wal-Mart’s expressed interest in unconditionally helping out Chilean retailer D&S with its outstanding public debt and a portion of its bank facilities is a positive for the credit quality of these instruments, and could lead to a ratings upgraded. D&S, whose IDR is rated BBB and has an AA minus rating locally, is on watch evolving. D&S’ has said that it will take a 3Q non-cash charge of approximately $180m and that it would breach covenant contained in approximately $616m of debt agreements. Wal-Mart’s additional explicit support of D&S provides further evidence of commitment to its newly acquired operation as well as the desire to implement more conservative accounting practices, which should benefit the retail operations and D&S over the medium-term, Fitch says. It adds that on a stand-alone basis, D&S’ credit quality has been under pressure due to the company’s rapid new store growth and its private label credit card business, which have pushed leverage metrics to high levels for the rating category. D&S’ debt ratings absent Wal-Mart’s support would likely be lower than current levels, Fitch says.