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Analytical Considerations Of Operating Leases In U.S. Retail Nov 05
Standard & Poors, Nov 2005
Abstract
Operating leases are heavily used in the U.S. retail sector. Land and buildings, core assets in both food and general retail, are frequently leased. In our analytical methodology, Standard & Poor's Ratings Services capitalizes operating leases to capture the debt-equivalent of a company's lease contracts in place. This puts rated companies on a more level playing field, taking into consideration all assets and liabilities, whether leased or owned. Our technique has a notable impact on all financial metrics (please see 'Corporate Ratings Criteria-Operating Lease Analytics' published on June 9, 2005). Our lease adjustment model does not necessarily replicate a scenario in which an asset is acquired and financed with debt. Rather, our adjustment reflects the debt-equivalent of operating lease commitments...
Companies mentioned in this report are: Albertson's Inc. ,Target Corp.,Kroger Co.,McDonald's Corp.,TJX Cos. Inc.,The Gap Inc.,Best Buy Co. Inc.,Ann Taylor Inc.,Staples Inc.,General Nutrition Centers Inc.,The Neiman Marcus Group Inc.,J. Crew Corp.,Big Lots Inc.,PetSmart Inc.,Perkins & Marie Callender's Inc.,Blockbuster Inc.,Jo-Ann Stores Inc.,Dollar General Corp.,Movie Gallery Inc.
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
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