latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/high-yield-bond-news/gap-rating-eyed-for-possible-downgrade-on-old-navy-spin-off-plan content
BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
PRIVACY & COOKIE NOTICE
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *

* Required

In this list

Gap rating eyed for possible downgrade on Old Navy spin-off plan

Churchill Downs announces $400M of eight-year notes for debt refi

Judge dismisses Marble Ridge claims over Neiman's MyTheresa transfer

Affinion receives consents for recap, covenant elimination

Revlon delays annual 10-K, details liquidity, ERP-related losses


Gap rating eyed for possible downgrade on Old Navy spin-off plan

S&P Global Credit Ratings placed the BB+ issuer credit rating of Gap Inc. (NYSE: GPS) under review for possible downgrade today, following the company’s recent announcement that it would spin off its relatively well-performing Old Navy business into a stand-alone public company.

S&P Global noted that the move would slash the revenue base for the remaining company—which will include Gap, Banana Republic, Athleta, Intermix, and Hill City—by roughly half, despite Old Navy accounting for roughly 30% of the total store base across the consolidated enterprise.

While S&P Global believes the spin-off will weaken the competitive position of the legacy business, it also said “the prospective capital structure could balance the less diverse business.” However, the agency added that it does not have any information regarding Gap's plans for the ultimate capital structure. The spin-off is expected in 2020.

Gap’s enterprise value at Nov. 30 was $10.4 billion, in line with its market cap due to an even balance between roughly $1.25 billion each of cash and debt. Its lone outstanding long-term debt issue—the $1.25 billion of 5.95% notes due 2021, which date to issuance in 2011—traded at 104 on Friday post the spin-off announcement, or in line with the weighted average of trades so far in 2019, according to MarketAxess. The T+113 spread on Friday was firm to the T+130 trailing average.

Moody’s characterized the spin-off plan as a credit negative, but made no immediate alterations to the Baa2 long-term rating or stable outlook.