CORPORATESISSUER COMMENT 16 NOVEMBER 2015TOYSRUS, INC. (TOY)Moodys Senior Unsecured Rating Caa2Moodys Outlook NEGBond-Implied Rating CCDS-Implied Rating CEDF-Implied Rating naAs of 11/12/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market Signals ReviewToysRUs: Market Signals at Five-Year Lows The bond- and CDS-implied ratings for ToysRUs are both C, their worst level of the last five years and the weakest possible market-implied rating (Figure 1).FIGURE 1. TOYSRUS: MOODYS AND MARKET-IMPLIED RATINGS, 60 MONTHS (MONTHLY DATA)The bond-implied rating reached a 60-month peak of Ba1 in April 2011. Since then it slid steadily lower to C in October 2013. It rebounded to Caa2 on multiple dates between June 2014 and August 2015.The companys CDS-implied rating reached a five-year high point of B2 on multiple dates, most recently in March 2012. Since then it has generally descended lower, with the exceptionMOODY'S ANALYTICS CORPORATES2 16 NOVEMBER 2015 MARKET SIGNALS REVIEW: TOYSRUS: MARKET SIGNALS AT FIVE-YEAR LOWSof a brief upward spike in February 2014. Its current C is its most frequent level since May of 2014.ToysRUs does not have an EDF'-implied rating.According to our ratings gap-conditioned transition matrices, companies rated Caa2 with a bond-implied rating of C outperformed the broad market 83% of the time over the following 12 months, matched the markets performance 6% of the time, and defaulted 7% of the time. We note that there are only 89 such observations in our historic data base, the smallest sample of any combination of MIS ratings and bond-implied ratings.Readers will recall that when a market-implied rating is unchanged the underlying securities have matched the performance of the broad ma...
