S&P keeps Hudson's Bay on negative watch

Standard & Poor's said it kept Hudson's Bay Co.'s BB- corporate credit rating, BB- senior unsecured debt rating and B subordinated debt rating on CreditWatch with negative implications, where they were placed on Nov. 29.

S&P said the CreditWatch update follows the company's announcement that it has entered into an acquisition agreement and 10-year alliance with General Electric Co. (AAA/stable/A-1+) in which GE will purchase Hudson's Bay's private-label credit card and related financial services assets for C$370 million.

With the financial services sale, Hudson's Bay will be able to dispense of heavy funding costs and servicer fees associated with managing its own credit card portfolio, the agency said. Nevertheless, the company will continue to rely heavily on its credit card operation for a disproportionably high level of operating income contribution relative to its core retailing operations.

In addition, S&P said it believes that Hudson's Bay shareholders will approve Maple Leaf Heritage Investments' amended all-cash offer for 100% of the company's common shares, an offer that is endorsed by the board of directors and would result in Hudson's Bay's C$200 million 7 ½% convertible debentures due 2008 being redeemed.

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