S&P Places PetSmart (PETM) on CreditWatch Negative Following M&A Announcement

Standard & Poor's Ratings Services said today that it placed its 'BB+' corporate credit rating on pet retailer PetSmart Inc. (Nasdaq: PETM) on CreditWatch with negative implications.

The CreditWatch placement follows PetSmart's announcement that it has entered into a definitive agreement to be acquired by a consortium led by B.C. Partners in a transaction valued at approximately $8.7 billion. The company expects the transaction to close in mid-2015.

We expect the sale of the company to result in higher debt levels, with all credit-protection measures declining accordingly, which will result in our reassessment of its financial risk profile. We believe PetSmart's leverage could increase to above 5x on a sustained basis from 1.5x as of Nov. 2, 2014. We will also view its financial policy under the private equity ownership as consistent with a 'B' category rating, supporting our expectation of a downgrade.

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