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I AGREE
24 Feb 2011
Approximately $1.1 billion of rated debt affected
New York, February 24, 2011 -- Moody's Investors Service today assigned B2 Corporate Family and
Probability of Default Ratings to Jo-Ann Stores, Inc.
("Jo-Ann"). At the same time Moody's also
assigned a B1 (LGD 3, 38%) rating to the company's
proposed senior secured term loan and a Caa1 (LGD 5, 82%)
rating to the company's proposed senior unsecured bonds.
The rating outlook is stable. The ratings assigned are subject
to receipt and review of final documentation.
RATINGS RATIONALE
The B2 Corporate Family Rating assigned to Jo-Ann reflects the
company's highly leveraged capital structure following its proposed
acquisition by affiliates of Leonard Green & Partners L.P.
We expect debt/EBITDA to be around 6.3 times and interest coverage
(EBITA/interest expense) to be around 1.5 times. The ratings
reflect the generally positive characteristics of the craft and hobby
category, which has a loyal customer base and positive demographic
trends. The rating also reflects Jo-Ann's solid execution
during the recent recessionary environment, with the company reporting
positive comparable store sales since 2007, while also materially
expanding operating margins. We expect that the company will be
able to sustain these recent improvements, primarily through new
store openings and continued investments in operating efficiencies.
The stable rating outlook reflects our expectations that Jo-Ann's
leverage will remain high, and that it will only moderately deleverage
over the next 12 to 24 months as the company increases its investment
in new store openings and remodels.
Ratings could be upgraded if the company continues to demonstrate sales
growth and operating margin expansion while also deleveraging its balance
sheet. Quantitatively ratings could be upgraded if debt/EBITDA
is sustained below 5.5 times and interest coverage exceeds 1.75
times.
Ratings could be downgraded if the company's recent positive trends
in sales and operating margin expansion begins to reverse, liquidity
erodes or financial policies become more aggressive. Quantitatively
ratings could be downgraded if debt/EBITDA is sustained above 6.5
times or interest coverage falls below 1.25 times.
The following ratings were assigned:
Corporate Family Rating at B2
Probability of Default Rating at B2
$650 million senior secured term loan due 2018 at B1 (LGD 3,
38%)
$450 million senior unsecured notes due 2019 at Caa1 (LGD 5,
82%)
The principal methodologies used in this rating were Global Retail Industry
published in December 2006, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
Moody's last rating action on Jo-Ann Stores, Inc.
was on March 1, 2010 when all ratings were withdrawn following the
company's repayment of all rated debt.
Headquartered in Hudson, OH, Jo-Ann Stores is a leading
retailer of fabrics and craft supplies, operating 751 stores in
48 states as of January 29, 2011. Revenues for the fiscal
year ended January 29, 2011were $2.079 billion.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
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validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
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Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Scott Tuhy
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns ratings to Jo-Ann Stores, Inc. (CFR at B2)
No Related Data.
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