Two weeks ago Best Buy's stock fell more than 12 percent after the big-box electronics retailer announced it would close 50 stores and lay off hundreds. The moves will save the company more than $800 million over five years. But Best Buy's decision led Standard & Poor's Ratings Services to put Best Buy's BBB - credit rating on watch "with negative implications."
The credit watch means there is a 50-50 chance the rating could move down to BB+, which is the first non-investment grade or "junk" rating. More reaction followed that news.
Carol Levenson, director of research for Gimme Credit, filed this note after S&P's news: "We don't see a material financial impact from a downgrade to junk, given the company's strong liquidity and free cash flow generation."
But Levenson added she is worried: "If Best Buy loses its investment-grade status management would have less of a motive to maintain conservative financial policies." Gimme Credit, with offices in New York and Chicago, provides independent research on corporate bonds.
ALLETE DRAWS COVERAGE
Ladenburg Thalmann analyst Brian Russo picked up coverage on Allete Inc. The Duluth-based company provides energy in the Upper Midwest through its Minnesota Power electric utility.
Russo began coverage with a "neutral" rating. In his initial report he wrote "We expect mid- to high-single-digit average annual earnings growth [5 to 8 percent] through 2014 driven by transmission projects, generation infrastructure, renewable growth, and favorable industrial customer demand trends."
PATRICK KENNEDY
