S&P assigns BB- to HD Supply notes

S&P said it assigned its BB- issue-level rating and 6 recovery rating to HD Supply Inc.'s proposed $750 million senior unsecured notes due in 2026. The 6 recovery rating indicates an expectation of negligible (0%-10%; rounded estimate: 5%) recovery in the event of a default.

S&P said it expects that HD Supply will use the proceeds, available cash and borrowings under its asset-based lending (ABL) revolving credit facility to redeem all of its outstanding $1 billion senior unsecured notes due in 2024.

“Our issuer credit rating on HD Supply remains BB+ with a stable outlook. Our rating reflects the company's respectable business-line diversity, solid market positions, and good operational scale,” S&P said in a news release.

“These positive factors are tempered by the cyclical nature of HD Supply's housing- and construction-related end markets and its limited pricing power given the fragmented and highly competitive industry consisting of other distributors, manufacturers that sell directly to customers, and internet-based entrants.”

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