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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
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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'
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'.
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