S&P rates Michaels notes CCC+, view cut to stable

Standard & Poor's said it revised the outlook on Michaels Stores Inc. to stable from positive.

The agency also said it affirmed the company's B corporate credit rating.

The agency also said it assigned a B corporate credit rating to Michaels FinCo Holdings LLC and Michaels FinCo Inc.

S&P also said it assigned a CCC+ rating to the company's proposed $700 million senior unsecured payment-in-kind notes due 2018. The recovery rating is 6, indicating 0% to 10% expected default recovery.

The proceeds will be used to fund a dividend to its financial sponsors, Bain Capital and the Blackstone Group, Highfields and internal equity holders, the agency said.

The outlook revision reflects a view that the company's credit protection measures will moderately weaken following the proposed debt issuance, said Kristina Koltunicki, an S&P analyst.

Financial ratios are expected to remain indicative of a highly leveraged profile absent the pay down of debt or a substantial improvement to operating performance over the next year, Koltunicki said.

The stable outlook reflects a view that the proposed debt issuance will impede any meaningful improvement to the company's financial risk profile over the next 12 months, S&P said, despite a forecast for modest operating performance improvements.

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