S&P puts Rent-A-Center on watch

Standard & Poor's said it placed its debt ratings, including its BB+ corporate credit rating, on Rent-A-Center Inc. on CreditWatch with negative implications.

The agency said that the rating action follows the company's announcement that it had reached a definitive agreement to acquire major competitor Rent-Way Inc. for $567 million.

The acquisition will be funded with an increase in its senior credit facility, S&P noted.

Based on Rent-Way's estimated EBITDA of $60 million for 2006, the purchase price represents an approximate 9.5 times multiple of EBITDA, the agency said.

Although Rent-A-Center anticipates significant cost savings from the acquisition, S&P said it believes the transaction will weaken Rent-A-Center's financial profile.

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