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S&P rates Toys loan BB-
Standard & Poor's said that it assigned a BB- issue rating and 1 recovery rating to the proposed $400 million tranche B-2 term loan due 2018 to be issued by Toys 'R' Us Inc.'s subsidiary Toys 'R' Us Delaware Inc.
The company's ratings remain on CreditWatch with positive implications, the agency said. The CreditWatch placement follows the company's S-1 filing, under which it plans to sell up to $800 million in common stock.
The proceeds will be used to repay debt.
Toys has achieved adequate operating performance despite sales pressure due to sharp execution, merchandising and cost-control initiatives that have helped mitigate the effects of competitive pressure and protected profitability, the agency said.
The ratings consider slight improvements in gross margin due to a shift in sales mix, adequate liquidity, the expectation that the company's operating results will remain good because of management's success with its merchandising strategy and cost-control initiatives, and the positive effect of the store conversion program, the agency added.
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