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Published on 3/31/2021 in the Prospect News Bank Loan Daily and Prospect News High Yield Daily.

S&P rates Michaels loan B, notes CCC+

S&P said it revised its outlook on Michaels Cos. Inc. to stable from positive and affirmed the B issuer credit rating.

At the same time, S&P assigned a B issue-level rating and 3 recovery rating to the company's proposed senior secured facilities and a CCC+ issue-level rating and 6 recovery rating to its proposed senior unsecured notes.

Financial sponsor Apollo Global Management is acquiring Michaels for a total consideration of about $5.5 billion, including equity and debt. The transaction will increase the amount of funded debt on Michaels' balance sheet by $1.6 billion.

“The buyout will raise the company's leverage to the 5x area and considerably increase its interest burden,” S&P said in a news release.

As part of the financing for the buyout, Michaels is issuing $2.8 billion of senior secured debt, comprising a $1.8 billion term loan and $1 billion of senior secured notes, as well as $1.3 billion of senior unsecured notes. The company is also upsizing its asset-based lending facility to $1 billion from $850 million. Apollo will contribute $1.4 billion of equity as part of the buyout.


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