NEW YORK-- (BUSINESS WIRE) -- Fitch Ratings views Distribucion y Servicios D&S S.A.'s (D&S) recent announcement that it will receive an irrevocable and unconditional guarantee from controlling parent company Wal-Mart Stores, Inc. (Wal-Mart) for all of its currently outstanding public debt and a portion of its existing bank facilities as a positive to the credit quality of these debt instruments, which will likely lead to an upgrade for these rated securities.

Wal-Mart's commitment to guarantee this debt follows D&S' announcement that it will take a third quarter non-cash charge of approximately US$180 million and that it would breach covenant contained in approximately US$616 million of debt agreements. In consideration for the Wal-Mart guarantee, D&S will seek removal of substantially all of the covenants contained in these debt obligations from creditors. The charge-offs are the result of the recent implementation of changes in internal accounting and business practices.

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. 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. The write-off will not impact cash flow or leverage as measured by debt to cash flow (or EBITDA).

Fitch's current ratings for D&S are on Rating Watch Evolving as follows:

--Foreign and local currency Issuer Default Ratings (IDRs) 'BBB';

--Long-term national scale rating 'AA-(Chl)';

--Short-term national scale rating 'F1+(Chl)'.

The Rating Watch Evolving status reflects the still developing medium-term operating plan and financial strategy under the new controlling ownership of Wal-Mart (Fitch IDR 'AA' with a Stable Outlook), which controls 74.55% of D&S.

D&S is the largest supermarket operator in Chile, with revenues of USD4.1 billion in the latest 12 months (LTM) ended June 30, 2009. The company operates 222 stores in Chile including supermarkets, hypermarkets and discount stores, as well as 10 commercial centers. For the LTM period ended June 2009, D&S' EBITDAR was US$307 million, while total debt (on-balance and off-balance) was US$1.47 billion; and account receivable balance (short- and long-term) totaled approximately US$750 million.

Wal-Mart is the world's largest retailer with revenues of approximately US$403 billion and over 7,873 stores in the LTM ended July 31, 2009. Wal-Mart operates Wal-Mart discount stores, super centers, Neighborhood Markets and Sam's Club locations in the United States. The company also operates in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico and the United Kingdom and, through a partnership, in India.

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