Moody’s eyes Michaels for downgrade

Moody’s Investors Service said it placed Michaels Stores, Inc.’s Ba3 corporate family rating on review for downgrade. Moody’s also placed the Ba3-PD probability of default rating, Ba3 senior secured and B2 senior unsecured ratings on review for downgrade. The agency revised the outlook to ratings under review from stable.

The review reflects governance considerations, which include Michaels’ announcement it agreed to be acquired by investment funds managed by affiliates of Apollo Global Management, Inc. in a deal valued at about $5 billion, the agency said.

The deal will be financed through committed equity from Apollo and committed debt financing.

“Moody’s review will focus on Michaels’ completion of the transaction, its final capital structure, future governance considerations particularly its financial strategies, including its willingness to de-leverage using excess cash and free cash flow under new private ownership,” the agency said in a press release.

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