Moody's Clarifies Stance on Staples (SPLS) Following Launch of Proposed Financing

In a release published April 6, 2015 and available on Moodys.com, Moody's Investors Service stated that Staples, Inc.'s ("Staples")(NASDAQ: SPLS) launching of the proposed financing of its pending acquisition of Office Depot, Inc. ("Office Depot") would have no immediate impact on either the Baa2 senior unsecured or the Prime-2 commercial paper ratings, which remain on review for downgrade.

"As a result of the company's launch of the financing package for the proposed acquisition of Office Depot, we believe we can provide further clarity with respect to potential rating outcomes for both the senior unsecured and commercial paper ratings," stated Moody's Vice President Charlie O'Shea. "We recognize that various regulatory approvals remain necessary, and the financing will not be funded until the formal closing. We believe the proposed ABL and Term Loan are functioning as bridge loans to facilitate the acquisition of Office Depot, and that the underlying structures provide for significant flexibility with respect to their repayment or refinance. To that end, downgrades of the Baa2 senior unsecured rating and the Prime-2 commercial paper ratings would likely be limited to one-notch if Staples demonstrates the ability and willingness to reduce leverage to around 3.5 times within 24 months of closing of the acquisition. In the event we do not believe Staples will be able to accomplish this within that general time frame, there is potential for two notch downgrades of both ratings. Under either scenario, the rating on the Term Loan would remain investment grade."

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