Moody's may downgrade Petco

Moody's Investors Service said it placed Petco Animal Supplies Inc.'s Ba2 corporate family rating and B1 $89.3 million 10¾% senior subordinated note due 2011 on review for possible downgrade.

According to the agency, the review is prompted by the announcement that Petco intends to be acquired in a leveraged buyout privatization transaction by affiliates of Leonard Green and Texas Pacific Group for total consideration of about $1.8 billion (about 9 times EBITDA).

Moody's noted that the senior subordinated notes are puttable at 101% of par upon a change of control and first become callable at 105.375% of par in November.

During the review, the agency will consider specific financing plans for the transaction, the outcome of potential attempts to redeem the senior subordinated notes and operating performance expectations for Petco.

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