Moody’s has upgraded L Brands to Ba3 from B2 with a stable outlook reflecting strong governance that resulted in a balanced financial policy and an excess cash of $3.9bn at the end of 2020. Last year, the company had slashed dividends by ~50% and curtailed share repurchases despite a $500mn share repurchase authorization. The excess cash was used to complete a debt repayment of $1bn, which included $750mn of senior secured notes issued last year. The Ohio-headquartered company operates 2,669 stores in the US, Canada and Greater China and its brands include Victoria’s Secret, Bath and Body Works and PINK. Bath and Body has benefitted from the change in consumer spending patterns during the pandemic while operations at Victoria’s Secret have been improving lately. As per Moody’s, “L Brands’ Ba3 CFR is supported by its strong Bath & Body Works operations, which generate significant free cash flow and improving operations at Victoria’s Secret. L Brands benefits from significant scale with January 30, 2021 fiscal year end revenues of about $11.8 billion. The rating is also supported by very good liquidity as it has improved its operational performance and reduced debt and extended debt maturities.”

L Brand’s 6.875%% 2035s and 7.6% 2037s were up 0.65 and o.25 to trade at 121.33 and 118.5 respectively.
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