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

U.S.-based PetSmart Inc. announced plans to refinance its capital structure, pushing out maturities and reducing total funded debt by about $1.75 billion to around $5 billion. Performance trends have been good at PetSmart as the pandemic provides tailwinds to pet retail sales. However, the transaction also removes Chewy stock (pledged as collateral under existing debt) and PetSmart will no longer have an ownership position in Chewy, which weakens its market position. We are raising the issuer credit rating on PetSmart to 'B' from 'B-'. At the same time, we are assigning our 'B' issue-level rating to the company's proposed $2.3 billion senior secured term loan and $1.2 billion of senior secured notes. We are also assigning our 'CCC+' issue-level rating

...- U.S.-based PetSmart Inc. announced plans to refinance its capital structure, pushing out maturities and reducing total funded debt by about $1.75 billion to around $5 billion. - Performance trends have been good at PetSmart as the pandemic provides tailwinds to pet retail sales. However, the transaction also removes Chewy stock (pledged as collateral under existing debt) and PetSmart will no longer have an ownership position in Chewy, which weakens its market position. - We are raising the issuer credit rating on PetSmart to 'B' from 'B-'. - At the same time, we are assigning our 'B' issue-level rating to the company's proposed $2.3 billion senior secured term loan and $1.2 billion of senior secured notes. We are also assigning our '###+' issue-level rating to the proposed $1.15 billion of senior unsecured notes. - The stable outlook reflects our expectation for leverage to remain less than 6x in 2021 while also recognizing the aggressive financial policy employed by the sponsor-owner...

Research Update