S&P upgrades Michaels

S&P said it raised the corporate credit rating on the Michaels Cos. Inc. to BB- from B+.

The agency also said it raised the ratings on the company's term loan to BB+ from BB.

The recovery rating on this facility remains at 1, indicating 90% to 100% expected default recovery.

S&P also said it raised the ratings on the company's senior subordinated notes to B from B-. The recovery rating remains at 6, indicating 0 to 10% expected default recovery.

The outlook is stable.

The upgrades reflect expectations that the company’s stable operating performance trends in a challenging retail environment will continue, positioning the company to keep adjusted leverage of less than 4.5x and generate free operating cash flow of about $400 million in fiscal 2017, S&P said.

The agency said it expects recent initiatives to enhance value perception and increase customer engagement will bolster traffic and ticket growth.

The company also is expected to realize direct sourcing benefits from its acquisition of Lamrite West last year, S&P said.

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