Rating Action:
Moody's downgrades PetSmart to B2, outlook remains negative
Global Credit Research - 05 Jan 2018
New York, January 05, 2018 -- Moody's Investors Service, ("Moody's") today downgraded PetSmart, Inc.'s Corporate Family Rating and Probability of Default Rating to B2 and B2-PD from B1 and B1-PD respectively. Moody's also downgraded the rating of its senior secured term loan and senior secured notes to B1 from Ba3 and its senior unsecured notes to Caa1 from B3. The ratings outlook remains negative.
"The downgrade reflects PetSmart's weak operating performance, especially in its core retail business, which has been below our expectations and we therefore do not expect its credit metrics, already weakened by the recent Chewy acquisition, to demonstrate any meaningful improvement in the next 12 months," Moody's Vice President Mickey Chadha stated. "Like most high growth pure play online retailers we estimate Chewy will remain EBITDA negative for at least the next 12 months and our negative outlook reflects the uncertainty around PetSmart's ability to reduce leverage to below 6.5 times considering the execution and integration risks associated with the Chewy acquisition and the increasingly competitive business environment", Chadha further stated.