Two ratings firms placed their junk-level ratings on retailer
Saks Inc. (SKS) on watch for downgrade Monday, a review that comes
after Hudson's Bay Co. (HBC.T) agreed to purchase the high-end
retailer for about $2.4 billion.
Fitch Ratings flagged concern about an opposing bid that could
lead to a leveraged transaction and thus pressure the company's
ratings. Saks's takeover agreement has a 40-day "go shop" period,
allowing others to come forward with a potentially sweeter
offer.
Earlier Monday, Hudson's Bay agreed to pay $16 a share in cash
for Saks, a deal that would give the acquirer a high-end luxury
chain and a portfolio of valuable real estate. Saks's shares closed
Monday up 4.2% at $15.95.
Fitch said if Saks were to be acquired by Hudson's Bay, it would
withdraw its ratings on Saks. The company's long-term issuer
default rating now stands at double-B, or two levels into junk
territory.
Following Fitch's move, Moody's Investors Service placed the
firm's Ba2 rating also on watch for downgrade, as it focuses on the
capital structure being put into place to finance the deal. The
review also will focus on the closing of the transaction and,
should the deal not close, financial policies for Saks going
forward.
Moody's said it views the potential deal favorably, as it will
give Saks an opportunity to grow in Canada and also generate
synergies with Lord & Taylor.
Earlier Monday, Standard & Poor's Ratings Services said the
Hudson's Bay-Saks deal would have no immediate affect on its
ratings on either Saks or Lord & Taylor, a retailer owned by
Hudson's Bay. S&P is awaiting more details about financing, or
if any new bids were to arise.
S&P earlier this month already placed its ratings on Saks on
watch for downgrade, at that time saying any deal to acquire the
company would likely add a substantial amount of debt to the
retailer's balance sheet.
Both S&P and Moody's rate Saks at the same level as Fitch,
two notches into junk.
Write to John Kell at john.kell@wsj.com
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