Michael’s Corporate Credit Rating Q2 2021

Michael's Store Concept

Michael’s, the arts and crafts retailer is making a strong comeback since COVID. Although they’re facing fierce competition from Amazon and other e-commerce retailers, I think you have to consider the Michael’s customer persona more deeply. They sell arts and crafts supplies. People who buy arts and crafts are highly visual, and tactile, especially with regards to the nature of shopping for creative materials and tools. Therefore, I’m bullish on the experiential value of this retailer. I think at the end of the day their customers value the ability to physically interact with the products before purchasing them. Additionally, Michael’s has been adding new Makers Centers within their stores, offering classes, creative workspaces, and other experiences.

Michael’s NNN For Sale

I’m bringing a new Michael’s store to market soon. If you’re interested in investing in a Michael’s NNN property, please get in touch.

Michael Salafia | 786-522-7134 | michael.salafia@marcusmillichap.com

Here’s the report from S&P Global:

Michaels Stores offers $500M of secured bonds for TL repayment

Michaels Stores Inc. has announced a $500 million offering of seven-year (non-call three) secured notes for pricing today. An investor call for the deal is scheduled for 11 a.m. ET. Bookrunners are J.P. Morgan, Wells Fargo, BofA Securities, Truist, Goldman Sachs, Barclays, Citizens, US Bancorp, BMO Capital Markets, Fifth Third, Credit Suisse and UBS. Initial price thoughts are 5.25%-5.50%, according to sources.

Michaels Stores is a wholly owned subsidiary of The Michaels Cos., an arts and crafts retailer.

Proceeds, together with borrowings under a proposed term loan and cash on hand, will be used to repay the issuer’s existing $2.17 billion term loan B due January 2023 (L+250, 0% floor).

Michaels has also launched a $1.62 billion, seven-year term loan B due 2027 for the refinancing effort.

S&P Global Ratings has assigned a B+ rating to the notes and loan. “The combined transaction will extend Michael’s maturity profile and leave it with sufficient liquidity to execute its strategic initiatives while managing persistent business volatility stemming from the COVID-19 pandemic,” Ratings said today. The outlook on Michaels was revised to positive, from negative, on Sept. 9.

Moody’s has a Ba3 rating for the company’s existing secured debt, with a stable outlook.

Existing fixed-rate debt at the company includes $500 million of 8% senior notes due 2027.

Michael Salafia
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