S&P rates Toys "R" Us notes B+

Standard & Poor's said it affirmed Toys "R" Us Inc.'s B corporate credit rating and assigned a B+ rating to US Propco's proposed $950 million unsecured notes with 2 recovery rating.

The outlook remains negative.

The notes will be issued by US Propco, to be renamed Toys R Us Property Co. I LLC, a bankruptcy remote special purpose entity.

Proceeds will be used to repay borrowing under the $1.3 billion unsecured US Propco loan due 2010.

Ratings reflect participation in the intensely competitive toy retailing sector, extreme seasonality and dependence on "hot" products and video games, as well as high debt leverage and thin cash flow protection measures, the agency said.

The company's strong execution, merchandising initiatives, cost control and the store conversion program have helped mitigate the effects of negative sales and protect profitability, S&P said.

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