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Staples Inc was downgraded to B- from B by S&P. The rating agency said that it does not expect a significant improvement in credit metrics of Staples over the coming quarters, affected by soft demand and cost increases. These factors also weigh on Staples’ refinancing plans especially for its maturities post -2024. Its Q2 2023 sales were at its lowest since Q4 2021 and S&P believes that operating capacity will stay below pre-pandemic levels. EBITDA margins are also not expected to improve further and beat its forecast of 9% with debt-to-EBITDA to stay above 7x. Staples had $127mn of cash and $637mn available under its asset-backed lending (ABL) facility at end-June 2023. S&P noted that liquidity will deplete if the company uses its ABL facility to repay term loan maturities, further pressuring its finances.
Staples’ 7.5% 2026s were trading flat at 82.75 cents on the dollar, yielding 15.98%.