Moody’s rates Michaels loan Ba3

Moody's Investors Service said it assigned a provisional Ba3 rating to the proposed $850 million secured term loan of Michaels Stores, Inc., an indirect subsidiary of Michaels FinCo Holdings, LLC.

At the same time, the agency affirmed the Ba3 rating on the company's existing $1.6 billion secured term loan and placed all other ratings within the corporate structure on review for upgrade.

The SGL-2 speculative grade liquidity rating was affirmed.

Michaels intends to use the proceeds from the proposed $850 million term loan along with a $250 million add-on to its 5 7/8% subordinated notes to repay its 7¾% unsecured notes, after consideration to breakage costs associated with early repayment of the notes, as well as fees and expenses.

Moody’s said the transaction as proposed is positive for Michaels' credit profile, as it could significantly reduce the company's cash interest burden by about $30 million annually. Debt will increase by over $90 million with a limited impact on overall lease-adjusted leverage.

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