S&P rates Toys ‘R’ Us unit’s notes B-

S&P said it assigned its B- issue-level rating and 4 recovery rating to TRU Taj LLC's $583 million 12% senior secured notes due 2021. The 4 recovery rating reflects S&P’s expectation for average recovery (lower half of the 30% to 50% range) in the event of a payment default.

All other ratings on parent Toys “R” Us Inc., including the B- corporate credit rating and stable outlook, remain unchanged.

S&P said the rating action follows the issuance of the notes, for which the $441 million of new TRU Taj notes (and about $110 million of cash) were exchanged for a portion of Toys “R” Us Inc.'s 10 3/8% senior notes due Aug. 15, 2017 and 7 3/8% senior notes due Oct. 15, 2018.

About $105 million of the 2017 notes and $208 million of the 2018 notes remained outstanding after the initial exchange offer; the company announced Aug. 26 that it plans to redeem the remainder of the 10 3/8% notes with cash from the issuance of an additional $142 million of new exchange notes.

TRU Taj LLC, a wholly owned subsidiary of Toys “R” Us Inc., is a holding company for a substantial portion of Toys “R” Us Inc.'s international subsidiaries.

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