Research Update: PetSmart Inc. Upgraded To 'B' On Proposed Refinancing Transaction; Outlook Stable; New Debt Rated

U.S.-based PetSmart Inc. announced new plans to refinance its capital structure, pushing out maturities and reducing total funded debt by about $1.75 billion to around $4.7 billion. As part of the refinancing, PetSmart (which will convert to PetSmart LLC with the transaction) will no longer have an ownership position in Chewy, which weakens its market position. However, $4.0 billion of Chewy stock will be pledged by the sponsor as collateral under the new secured credit facilities. We expect PetSmart's good performance trends to continue as the pandemic provides tailwinds to pet retail sales. We are raising the issuer credit rating on PetSmart to 'B' from 'B-'. At the same time, we are assigning our 'BB-' issue-level rating and '1' recovery

...- U.S.-based PetSmart Inc. announced new plans to refinance its capital structure, pushing out maturities and reducing total funded debt by about $1.75 billion to around $4.7 billion. - As part of the refinancing, PetSmart (which will convert to PetSmart LLC with the transaction) will no longer have an ownership position in Chewy, which weakens its market position. However, $4.0 billion of Chewy stock will be pledged by the sponsor as collateral under the new secured credit facilities. - We expect PetSmart's good performance trends to continue as the pandemic provides tailwinds to pet retail sales. We are raising the issuer credit rating on PetSmart to 'B' from 'B-'. - At the same time, we are assigning our '##-' issue-level rating and '1' recovery rating to the company's proposed $2.3 billion senior secured term loan. The '1' recovery rating for the senior secured facilities indicates our expectation for very high recovery (90%-100%; rounded estimate: 90%) recovery in the event of a payment...

Research Update