S&P cuts Best Buy's credit rating to junk status

Article by: JACKIE CROSBY , Star Tribune
Updated: August 7, 2012 - 10:36 PM

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Best Buy's corporate credit rating was downgraded to junk status by Standard & Poor's this week after word that founder Richard Schulze had made an offer to take the electronics retailer private.

The rating agency lowered its corporate credit rating to "BB+" from "BBB-", its lowest investment grade rating, over fears that the $8.84 billion transaction would add "significant debt," according to a report on the proposal.

S&P had already downgraded the nation's largest consumer electronics retailer in April.

Junk bonds have a higher rate of default, but can often pay higher yields, making them attractive to investors.

Schulze said he would pay $24 to $26 a share to buy back the company, where he already owns 21.58 percent.

In a buyout, Schulze and his partners would take on debt that would be used to take over Best Buy. The expectation would be that the buyers would pay down debt by using Best Buy's cash flow or by selling some of its assets.

Jackie Crosby • 612-673-7335

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