Research Update: PetSmart Inc. Downgraded To 'B+' From 'BB+' On Debt-Funded Private Equity Acquisition; Off CreditWatch; Outlook Stable

A consortium of private equity investors led by B.C. Partners Inc. is acquiring PetSmart in a transaction valued at approximately $8.4 billion, funded by $6.2 billion new debt and $2.1 billion equity. Higher debt will hurt credit protection measures, which results in our reassessment of the company?s financial risk profile. We are therefore lowering the corporate credit rating on PetSmart to ?B+? from ?BB+?. We are assigning our ?BB-? issue-level rating to the company?s $4.3 billion term loan and ?B-? issue-level rating to the $1.9 billion senior unsecured notes. The stable outlook on PetSmart reflects our view that the company can achieve performance growth on cost savings initiatives and some debt reduction over the next year. On Feb. 9, 2015,

...A consortium of private equity investors led by B.C. Partners Inc. is acquiring + PetSmart in a transaction valued at approximately $8.4 billion, funded by $6.2 billion new debt and $2.1 billion equity. Higher debt will hurt credit protection measures, which results in our + reassessment of the company's financial risk profile. We are therefore lowering the corporate credit rating on PetSmart to `B+' from + `##+'. We are assigning our `##-' issue-level rating to the company's $4.3 billion term + loan and `B-' issue-level rating to the $1.9 billion senior unsecured notes. The stable outlook on PetSmart reflects our view that the company can achieve + performance growth on cost savings initiatives and some debt reduction over the next year....

Research Update