S&P rates Michaels notes B

S&P said it affirmed the BB- issuer credit rating on Michaels Cos. Inc. and BB+ rating with 1 recovery rating on the company's term loan.

The agency also said it assigned a B rating and 6 recovery rating to the company's proposed senior unsecured notes.

Michaels plans to issue $500 million of senior unsecured notes due 2027 to repay its existing $510 million senior subordinated notes due 2020, S&P said.

The ratings reflect a view that the proposed refinancing transaction is leverage neutral and credit metrics will remain largely in line with previous expectation through year-end, S&P said.

The agency said it believes the company's scale, effective merchandising and heightened focus on convenience, value and customer engagement will enable it to maintain its industry leading market position and generate reasonably consistent operating results, with strong free operating cash flow despite a challenging retail environment.

The stable outlook reflects an expectation that Michaels will maintain significant free operating cash flow generation despite deteriorating operating performance, S&P said.

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