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S&P puts Best Buy on watch
Standard & Poor's said it placed the BBB corporate credit rating on Best Buy Co. Inc. on CreditWatch with negative implications.
The action follows the company's announcement that it is acquiring 50% of a joint venture that will own Carphone Warehouse Group plc's European and U.S. retail interest for $2.1 billion.
Best Buy will finance the acquisition through cash on hand, existing bank lines and new debt.
The agency said that although Carphone appears not to have debt at closing, Best Buy is expected to bring Carphone's operating leases on its books. The deal is expected to close in the second quarter ending Aug. 30.
The deal is transformational for Best Buy, according to S&P. It will boost the company's international presence and help grow its retail cellular phone market.
The potential credit rating implications could be negative, however, due to increased leverage and the challenges of integrating two different corporate cultures, the agency noted.
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