Home decor retailer At Home Group Inc. has strengthened its balance sheet through the closing of a new $200 million private placement.
The company said the refinancing positions the “business to take advantage of opportunities created by recent competitive exits in the sector.”
“These transactions further strengthen our financial position and provide At Home with incremental capital to support our growth objectives and execute on our strategic plan,” Lee Bird, At Home’s chairman & CEO, said. “At Home’s value positioning, unique product assortment and unmatched selection remain highly differentiated in the marketplace.”
Bird explained that the refinancing allowed the company to further invest in its business as the go-to destination for home décor. “And with significant runway to add stores, we believe we are well positioned to continue our long track record of double-digit growth in the coming years,” he said.
The competitive exits the company is referring to include the bankruptcies of Bed Bath & Beyond and Tuesday Morning. Bed Bath & Beyond, which filed its Chapter 11 petition last month, is currently in liquidation mode, although it is still trying to find a going-concern buyer. In contrast, Tuesday Morning filed its bankruptcy petition in January, and has decided to throw in the towel and shut down operations.
Credit ratings firm S&P Global Ratings considers the debt swap as a distressed debt exchange, and it in turn lowered At Home’s credit rating.
“We view the transaction as distressed and tantamount to default because consenting unsecured noteholders will receive less than the original par amount promised,” the ratings firm said on Thursday. “We lowered our issuer credit rating on the company to ‘SD’ (selective default) from ‘CCC+’.”
The ratings firm also said it considers the exchange as distressed due to the company’s “weak performance trends, including comparable-sales declines, depressed profitability and pressured cash generation.”
PIK interest is used by borrowers who may with to avoid making a cash payment during the growth phase of their business.