S&P lifts Michaels view to positive, ups loans

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

At the same time, S&P raised its issue-level rating on Michaels’ $1.6 billion bank loan and its $850 million ($700 million outstanding) term loan B to BB from BB- and revised the recovery rating to 1 from 2, indicating an expectation for very high (90% to 100%) recovery in the event of a payment default.

S&P also affirmed the B- issue-level rating on the company’s $510 million senior subordinated notes due 2020. The 6 recovery rating, which indicates an expectation that noteholders would receive negligible recovery (0% to 10%) in the event of a payment default, remains unchanged.

“The outlook revision reflects the potential that we could raise our ratings on Michaels over the next 12 months if good operating performance, driven by successful merchandising, and improving credit metrics trends, including lower leverage and consistent free cash flow generation, continue throughout the second half of fiscal 2016,” said S&P credit analyst Declan Gargan in a news release.

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