Moody's rates Gap notes Ba3

Moody's Investors Service said it assigned the Gap Inc.’s planned $1.5 billion of senior unsecured notes a Ba3 rating and revised the outlook to positive from stable. Concurrently, the agency affirmed the Gap’s corporate family rating at Ba2 and its probability of default rating at Ba2-PD. The speculative grade liquidity rating remains SGL-1.

The Gap will use the proceeds and cash on hand for a tender for its senior secured notes. Its Ba2 senior secured rating will be withdrawn upon full repayment of the notes.

"The change in outlook to positive from stable reflects governance considerations including Gap's intention to repay approximately $750 million of debt and its conservative financial strategy which has targeted a smaller dividend than prior to the pandemic and its continued high cash balances," said Christina Boni, a Moody’s senior vice president, in a press release.

"Gap also continues to achieve significant improvement in its earnings as it recovers from the impact of the pandemic. A better than expected sales trajectory has been experienced in 2021 at all of Gap's major brands with positive comparable sales at the Old Navy, Gap and Athleta brands relative to 2019," Boni added.

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