Moody’s drops Toys "R" Us PDR

Moody's Investors Service said that if the exchange offer announced by Toys "R" Us, Inc. on June 14 proceeds as outlined, it will constitute a distressed exchange, which is an event of default under Moody's definition of default.

As a result, the probability of default rating was downgraded to Caa3-PD from B3-PD.

"We view Toys' proposed exchange as opportunistic and driven by a confluence of factors, and believe it enhances liquidity as it takes two meaningful maturities off the table for the next five years," Moody's vice president Charlie O'Shea said in a news release.

"The company's B3 corporate family rating is unaffected, and it is our expectation that if this exchange closes as outlined in the 8K filed yesterday, the PDR will return to the B3-PD rating level shortly thereafter."

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