Moody's rates Michaels notes B1

Moody's Investors Service said it assigned a B1 (LGD 2) to Michaels Stores, Inc.'s proposed eight-year $500 million senior unsecured note offering.

The proceeds, plus $10 million cash on hand, will be used to repay the company's existing $510 million senior subordinated notes due 2020.

Moody's also said it affirmed the company's Ba2 corporate family rating, Ba2-PD probability of default ratings and Ba2 (LGD 5) senior secured rating.

The notes will be guaranteed by Michael's existing and future domestic subsidiaries to the extent that such entity is a guarantor under the existing senior secured credit facility, the agency said.

The company's speculative grade liquidity rating also was affirmed at SGL-1 and the outlook is stable.

This refinancing extends Michael's debt maturity ladder in a leverage neutral transaction thereby improving the company's overall credit profile, Moody's said.

While operating income will be pressured this year due to soft demand and higher costs, the agency said it expects adjust debt-to-EBITDA ratio to remain about 3.7x.

The ratings are supported by the company's scale and strong market position as the established leader in the highly fragmented arts and craft segment of retail, Moody's said.

The company has a demonstrated track record of relatively stable revenues and very good liquidity, the agency said.

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