買債真係要好小心好小心, 買之前一定要睇PROSPECTUS.
市場先生很公平, 做足功課者未必贏錢, 但無做功課者99% 都輸
有幾多人買到3333/1918 而贏到10倍而齋靠運呢?
先求知, 再投資. 買股買債都要先睇哂所有年報/文件, 理解了解清楚先落手
仲要新上隻眾安, 輸緊錢都爆老孖去抽係咩玩法???
一陣好似中芯又或者前一日由656拆出來上市個隻SISRAM MED (1696) 咁, 真係喊都無謂
Fitch Downgrades Toys 'R' Us' IDR to 'D'
19 Sep 2017 5:49 PM EST
Fitch
Ratings-New York-19 September 2017: Fitch Ratings has downgraded the
Long-Term Issuer Default Ratings (IDRs) for Toys 'R' Us, Inc. (Toys, or
the Holdco) to 'D' from 'CC' following the announcement that the company
and certain of its U.S. subsidiaries and its Canadian subsidiary have
filed for Chapter 11.
Fitch has downgraded Toys 'R' Us - Delaware,
Inc., and TRU Taj LLC, to 'D' and affirmed the 'CC' rating on Toys 'R'
Us Property Co. I, LLC (which was not part of the bankruptcy filing). Of
the $5.27 billion in total debt that was outstanding on the petition
date (including $1.025 billion borrowings on its $1.85 billion domestic
ABL) for the consolidated company, Fitch expects that $2.85 billion of
debt will be impacted by the bankruptcy. A full list of rating actions
follows at the end of the release.
KEY RATING DRIVERS
DIP
Facilities: The company has received a commitment of $3,125 million in
debtor-in-possession financing from various lenders, including a J.P.
Morgan led bank syndicate and certain of the company's existing lenders,
subject to court approval. Proceeds will be used to support ongoing
operations during the bankruptcy process. The $3,125 million (with a
16-month maturity) in financing includes the following tranches:
(1)
a $2.3 billion ABL/FILO DIP Facility at Toys 'R' Us - Delaware, Inc.,
consisting of a senior secured revolving credit facility and letters of
credit in the aggregate amount of $1,850 million and a secured "first in
last out" term loan in the aggregate amount of $450 million, funded by a
syndicate of various lenders, including certain of the Prepetition ABL
Lenders, with JPMorgan acting as ABL/FILO DIP Agent. This will be used
to repay the Prepetition ABL/FILO Facility borrowings in full and
provide an incremental $170 million of liquidity.
(2) $450
million Term DIP Facility at Toys 'R' Us - Delaware, Inc. funded by an
ad hoc group of Prepetition Term Loan B-4 Lenders holding over 50
percent of the outstanding principal amount of Delaware Loans who were
willing to consensually prime their pre-petition liens. This will be
used for general corporate purposes, including the administration of
these Chapter 11 cases.
(3) $375 million Taj DIP Incremental
Notes to be provided by an ad hoc group of Taj Noteholders who were
willing to consensually prime their own liens. The incremental notes
will be used to pay interest on the Prepetition Taj Notes, and DIP fees,
as well as to provide liquidity to support the Debtors' international
operations. The group of Taj Noteholders also agreed to waive certain
defaults under the Prepetition Taj Notes and to forbear from exercising
rights and remedies pursuant to a default against the Debtors (the Taj
Waiver).
DERIVATION SUMMARY
The bankruptcy comes on the
heels of Toys facing a multi-decade onslaught of competition from
discounters such as Wal-Mart Stores, Inc. and Target Corporation, and
more recently, online-only players such as Amazon.com, Inc., leading to
market share losses. Fundamental characteristics of the toy industry,
including its seasonality, hit-driven nature, and low importance of
sales assistance and inviting in-store experience, continue to make it
attractive for the discount and online channels to take share. The
competitive and secular headwinds faced by the company have led to
meaningful top-line and EBITDA declines, and this combined with a highly
leveraged balance sheet as a result of its 2005 LBO rendered the
current capital structure unsustainable.
Other single category
retailers such as Best Buy (BBB-/Stable Outlook), The Gap (BB+/Stable
Outlook) and Kroger (BBB/Stable Outlook) have also faced secular
pressures but have been able to largely stem declines as a result of
their ability to invest in their businesses due to lower leverage
profiles and strong cash flow generation. Difference in category
fundamentals has also prevented these retailers from experiencing the
level of market share erosion to discount/online channels as seen with
the toy category. Both Toys and Sears Holding Corporation (CC) have been
facing significant market share erosion, although Sears' has been
funding its ongoing liquidity needs over the last few years with asset
sales and additional secured debt given negative EBITDA (since 2012) and
material fixed obligations.
KEY ASSUMPTIONS
Recovery Analysis and Considerations
For
issuers with IDRs at 'B+' and below, Fitch performs a recovery analysis
for each class of obligations. Issue ratings are derived from the IDR
and the relevant Recovery Rating (RR) and notching based on expected
recoveries in a going concern and liquidation reorganization scenario
for each of the company's note and loan issues. Toys' debt is at three
types of entities: operating companies (OpCo); property companies
(PropCos); and HoldCos, with a structure summary as follows:
Toys 'R' Us, Inc. (HoldCo)
(I) Toys 'R' Us-Delaware, Inc. (Toys-Delaware) is a subsidiary of HoldCo.
(a) Toys 'R' Us Canada (Toys-Canada) is a subsidiary of Toys-Delaware.
(II) TRU Taj LLC, an indirectly owned subsidiary of Holdco.
(a) Toys 'R' Us Property Co. I, LLC (PropCo I) is a subsidiary of TRU Taj.
OpCo Debt
Fitch
takes the higher of liquidation value or enterprise value (EV, based on
5.0x-6.0x range of multiple applied to going concern EBITDA) at the
OpCo levels: Toys-Delaware and Toys-Canada and the international
entities that provide a stock pledge to the debt at TRU Taj. The
5.0x-6.0x range is consistent with the 5.4x median multiple for retail
going concern reorganizations but at the low end of the 12-year retail
market multiples of 5x to 11x, and below 7x to 12x for retail
transaction multiples. The stressed EV is reduced by 10% for assumed
administrative claims.
Toys-Delaware
At the Toys-Delaware
level, recovery on the various debt tranches is based on liquidation
value of domestic assets rather than a going concern enterprise value.
To derive a going concern enterprise value of $1.5 billion, Fitch
assumes a going concern EBITDA of $310 million valued at a 5x multiple.
This assumes (i) ongoing domestic EBITDA of $230 million based on
revenue of $5 billion (an approximately 35% discount to current
Toys-Delaware revenues (ex. Canada) of $7.1 billion) operating at a 5%
EBITDA margin and (ii) $80 million of IP royalty fees that Toys charges
its international businesses and third parties.
In deriving a
liquidation value of domestic assets of $1.9 billion at Toys Delaware,
Fitch considered the liquidation value of domestic inventory and
receivables assumed at seasonal peak, at the end of the third quarter,
and applied typical advance rates of 75% and 80%, respectively, and
estimated value for Toys' IP assets, which are held at Geoffrey, LLC as a
wholly owned subsidiary of Toys-Delaware.
The debtors have proposed
a $2.3 billion ABL/FILO DIP Facility at Toys 'R' Us - Delaware, Inc.,
consisting of a senior secured revolving credit facility and letters of
credit in the aggregate amount of $1,850 million (which contains a $300
million Canadian sub-facility) and a secured "first in last out" term
loan in the aggregate amount of $450 million, which will be used to
replace the Prepetition ABL/FILO Facility in full and provide an
incremental $170 million of liquidity.
The $1.85 billion revolver
(DIP and pre-petition) is secured by a first lien on inventory and
receivables of Toys-Delaware. Fitch assumes $1.3 billion, or
approximately 70%, of the facility commitment is drawn under the
revolver. The $300 million sub-facility is more than adequately covered
by the EV of $550 million calculated by applying a 5x multiple based on
2016 EBITDA at the Canadian subsidiary and the $1.55 billion U.S
facility is more than adequately covered by domestic inventory. The
residual value of approximately $285 million from Canada is applied
toward the FILO term loan and B-4 term loan.
The New DIP FILO
term loan ($450 million which is expected to replace the existing $280
million) is secured by the same collateral as the $1.85 billion ABL
facility and ranks second in repayment priority relative to the ABL. The
FILO tranche is governed by the residual borrowing base within the ABL
facility and benefits from a lien against 15% of the estimated value of
real estate at Toys-Canada. This is also fully recovered.
The
ratings on the existing ABL and FILO facility is rated 'CCC/RR1' based
on outstanding recovery prospects (91% to 100%). Fitch will withdraw the
ratings once the DIP financing is ordered by the judge and the proceeds
are used to repay the pre-petition ABL and FILO borrowings in full.
The
$1 billion B-4 term loan and the $186 million of B-2 and B-3 term loans
have a first lien on all present and future IP, trademarks, copyrights,
patents, websites and other intangible assets, and a second lien on the
ABL collateral. The B-4 term loan also benefits from an unsecured
guaranty by the indirect parent of PropCo I and is secured by a
first-priority pledge on two-thirds of the Canadian subsidiary stock. In
addition, these term loans will also benefit from the liquidation value
for plant, property and equipment. At the end of 2016, Toys operated
879 domestic stores of which 318 units are held at Propco I and 123
units are held at Propco II leaving 438 units at Toys Delaware. The mix
of leased versus owned (included ground leases) is unclear, although on
Oct. 24, 2016, Toys filed an 8K disclosing that 103 Toys-Delaware
properties (88 ground leased locations where Toys owns the building and
15 owned locations) were appraised by Cushman and Wakefield at $568
million. Fitch has applied a dark store valuation of $370 million or 65%
of the appraised value. This is consistent with the market and dark
store valuations provided for assets under PropCo I and PropCo II over
the past few years.
Fitch has assumed that the new $450 million
Term DIP Facility at Toys 'R' Us - Delaware, Inc..will have super
priority claims over the current B-4 and B-2/B-3 term loan lenders.
Applying the waterfall of the applicable assets to the new and existing
term loans results in outstanding recovery for the new Term DIP
facility, superior recovery prospects (71% to 90%) for the B-4 term
loans which are rated 'CCC-/RR2' and average recovery prospects (31% to
50%) for the B-2/B-3 term loans which are rated 'C/RR4'. The $22 million
8.75% debentures due Sept. 1, 2021 have poor recovery prospects (0% to
10%) and are therefore rated 'C/RR6'.
Valuation of IP
Toys'
IP assets held at Geoffrey, LLC are the first lien collateral backing
the senior secured term loans issued at Toys-Delaware. The annual
license fees paid by HoldCo's international subsidiaries were $64
million as of Jan. 28, 2017, a decline from $102 million in 2012. In
addition, Toys generated $16 million in license fees from third parties
for a total of $80 million in licensing fees in 2016.
In terms of
valuing the IP, Fitch applied a 4.0x to 5.0x multiple to these royalty
streams from Toys' international subsidiaries (excluding Canada) and
third parties to arrive at a value of $350 million. While the multiple
paid could potentially be better, resulting in a higher IP valuation,
there could also be further downward pressure on the royalty stream
itself given weakness in its international businesses.
PropCo Debt
At the PropCo levels (PropCo I and other international PropCos) LTM net operating income (NOI) is stressed at 20%.
PropCo
I is set up as bankruptcy-remote entity with a 20-year master lease
through 2029 covering all the properties within the entities, which
requires Toys-Delaware to pay all costs and expenses related to leasing
these properties from these two entities. The ratings on the PropCo debt
reflect a distressed capitalization rate of 12% applied to the stressed
NOI of the properties to determine a going-concern valuation. The
stressed rates reflect downtime and capital costs that would need to be
incurred to re-tenant the space. The 12% capitalization rate reflects
the exposure to a single tenant versus a more diversified portfolio. As a
reference the Fitch CMBS Large Loan Rating Criteria typically uses
default cap rates of 8.5% to 11.25%.
Applying these assumptions
to the $866 million senior unsecured term loan facility at PropCo I
results in outstanding recovery prospects (91% to 100%) and the facility
is therefore rated 'CCC+/RR1'. The PropCo I unsecured term loan
facility benefits from a negative pledge on all PropCo I real estate
assets, which includes around 320 properties (318 stores, three
distribution centers and headquarters).
As described above, the
residual value of approximately $334 million after fully recovering the
$866 million term loan at PropCo I is applied toward the Toys-Delaware
B-4 term loan via an unsecured guaranty by the indirect parent of PropCo
I.
TRU Taj LLC Debt
The $583 million notes due 2021 are
secured by a stock pledge in certain international subsidiaries,
including guarantors of the European ABL. $375 million in Taj DIP
Incremental Notes will be provided by an ad hoc group of Taj Noteholders
who consented to prime the pre-petition liens of the Taj Notes.
The
EBITDA attributed to TRU Taj was $173 million in 2016, calculated on a
covenant basis. Fitch applied a 5.0x multiple to each entity's EBITDA,
subtracted out entity-level debt, which resulted in a remaining value of
approximately $600 million. Fitch first applied this towards the $375
million Taj DIP Incremental Notes and the remaining value against the
$583 million notes. This resulted in average recovery (31% to 50%) for
the existing notes and the notes are therefore rated 'C/RR4'.
Toys 'R' Us, Inc. - HoldCo Debt
The
$208.3 million 7.375% unsecured notes due Oct. 15, 2018 (and the $741
million senior notes due to Toys-Delaware that are considered pari passu
with the publicly traded HoldCo notes) have poor recovery prospects (0%
to 10%) because there is no residual value flowing in from the wholly
owned subsidiaries. Therefore, they are rated 'C/RR6'
LIQUIDITY
Toys
held $301 million of cash ($35 million at Toys 'R' Us - Delaware, Inc.)
and $252 million of availability under its various revolvers as of
April 29, 2017, including $176 million available under its domestic
$1.85 billion facility.
FULL LIST OF RATING ACTIONS
Fitch has taken the following rating actions:
Toys 'R' Us, Inc.
--Long -Term IDR downgraded to 'D' from 'CC';
--Senior unsecured notes affirmed at 'C/RR6'.
Toys 'R' Us - Delaware, Inc.
--Long-Term IDR downgraded to 'D' from 'CC';
--Secured revolver downgraded to 'CCC/RR1' from 'CCC+/RR1';
--Secured FILO term loan downgraded to 'CCC/RR1' from 'CCC+/RR1';
--Secured B-4 term loan downgraded to 'CCC-/RR2' from 'CCC/RR2';
--Secured B-2 and B-3 term loans downgraded to 'C/RR4' from 'CC/RR4';
--Senior unsecured notes affirmed at 'C/RR6'.
TRU Taj LLC
--Long-Term IDR downgraded to 'D' from 'CC';
--Senior secured notes downgraded to 'C/RR4' from 'CC/RR4'.
Toys 'R' Us Property Co. I, LLC
--Long-Term IDR affirmed at 'CC';
--Senior unsecured term Loan facility affirmed at 'CCC+/RR1'.
