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Friday December 20 12:55 PM EDT
DCR Downgrades Best Buy's Outstanding Debt and
Convertible MIPS
NEW YORK, Dec. 20 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
downgraded Best Buy Co., Inc.'s $150 million of senior subordinated notes to 'B' (Single-B) from
'BB' (Double-B) and approximately $22 million of subordinated notes to 'B' (Single-B) from 'BB'
(Double-B). In addition, $230 million of convertible monthly income preferred securities of Best
Buy Capital, L.P. have been downgraded to 'B-' (Single-B-Minus) from 'B+' (Single- B-Plus).
These actions reflect DCR's continuing concerns about the beleaguered personal computer and
consumer electronics businesses, which are Best Buy's largest selling categories. Operating
performance for the third fiscal quarter ended November 30, 1996, was considerably weaker than
anticipated. Significantly, operating earnings were affected by weaker comparable-store sales.
Also, third quarter earnings results include a $15 million pre-tax charge related to the write-down
of personal computer inventories and a decision to reduce office supply product SKUs. Sharply
reduced credit protection measures over the past three years, coupled with our expectation of no
near-term relief in this difficult operating environment, remain major concerns.
Earlier this year, Best Buy undertook strategic initiatives to enhance the sale of ancillary personal
computer products, to provide a more diverse offering of the top-selling brands of appliances, to
add a high-end gourmet/housewares line and to become more focused on the sale of extended
service plans. While DCR believes Best Buy has made progress with these strategic initiatives, the
improvement has not been enough to offset the softness in the personal computer and consumer
electronics categories and will take longer to have a positive impact on earnings.
Best Buy is one of the nation's leading specialty retailers with 272 stores in 32 states. The
company offers a wide selection of name brand consumer electronics, personal computers and
home office products, entertainment software and household appliances. SOURCE DCR |
