Tags: Moodys | Rating | Toys | Debt

Moody's Lowers Ratings for Toys 'R' Us Debt

Friday, 04 Apr 2014 04:18 PM

Toys ‘R’ Us Inc., the largest specialty toy chain, had its ratings cut by Moody’s Investors Service on “very poor” operating performance.

Moody’s reduced the toyseller’s corporate family ranking one level to B3, six levels below investment grade, and also lowered ratings on three senior secured notes totaling $1.6 billion and a $985 million term loan. The decision comes after the company last week reported a 2013 loss of $1 billion.

While liquidity remains good, Toys ‘R’ Us is “hamstrung” by debt from its 2005 leveraged buyout, with a ratio of debt to earnings before interest, depreciation, amortization and taxes of more than eight times, Moody’s said. That would have to fall below seven for Moody’s to consider a ratings increase, the New York-based firm said. Interest coverage would have to rise to at least 1.25 times from the current level of less than 1 time.

Even in a tough retail environment, the retailer’s performance was “well below” peers, Moody’s vice president Charlie O’Shea wrote in a note today. Toys ‘R’ Us was unable to cash in on videogame console launches that benefited competitors, O’Shea said. Last week, the company reported a 2013 loss of $1 billion, compared with $39 million in profit in the previous year. Sales dropped 7.4 percent to $12.5 billion.

The Wayne, New Jersey-based toyseller has faced stepped-up competition from mass merchants such as Wal-Mart Stores Inc. along with online giant Amazon.com Inc. since KKR & Co., Bain Capital LLC and Vornado Realty Trust took it over in a $6.6 billion buyout.


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Toys 'R' Us Inc., the largest specialty toy chain, had its ratings cut by Moody's Investors Service on "very poor" operating performance.
Moodys,Rating,Toys,Debt
256
2014-18-04
Friday, 04 Apr 2014 04:18 PM
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