Fitch rates Toys 'R' Us loan, notes B-

Fitch Ratings said it assigned B- ratings with a recovery rating of RR5 to Toys 'R' Us, Inc. subsidiary Toys 'R' Us Delaware, Inc.'s new secured term loan due 2016 and new senior secured notes due 2016.

The combined size of the issuance is expected to be $1 billion. Proceeds will be used to repay the existing $798 million secured term loan and $181 unsecured term loan. Upon repayment, Fitch's B- and RR5 recovery rating on those loans will be withdrawn. The refinancing will help extend the debt maturity profile with $162 million, $542 million and $281 million now due in 2010, 2011 and 2012, respectively.

The ratings are currently on Rating Watch positive following the May announcement of the company's plan to pursue an initial public offering estimated at about $800 million. A portion of the net proceeds from the IPO will be used for debt repayment, which Fitch said it expects will result in leverage decreasing to below 5.5x from 6.1x as of May 1.

The ratings continue to reflect the company's successful operating strategy, which resulted in improved operating results and credit metrics in the last 12 months despite the challenging operating environment, Fitch said.

The ratings also reflect an expectation for further strengthening of credit metrics in fiscal 2010 with positive free cash flow generation and improved liquidity, the agency said.

This is balanced by the intense competition in the toy retailing sector and the highly seasonal nature of the company's business, Fitch added.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.