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A Pin for Staples

05 April 2017 by pdonnat

On the catwalk yesterday, Staples was rumored to be in discussion with private equity groups to take the company private. The US and UK supermarket for office supplies is struggling with its business model. When you buy an ink cartridge, you always wonder how they can struggle, but they are indeed struggling, with online and brick and mortar retailers. To “Make it Happen” - for shareholders - the company thinks it would be better to be taken private. Would it be easier to chase again a merger with Office Depot? This merger was blocked by the FTC in May 2016. SPLS stock price was up 5% again today, 16% over the last 2 sessions. After jumping yesterday by 35 bps, from 206 bps to 241 bps, the 5Y CDS premium was pinned at the same level all day long. Being at the limit of the investment grade and the high yield, the credit investor will be very demanding to add more debt on the company to finance a LBO. This should be taken into account by equity investors.
Meanwhile, the credit index market was strong especially when the US came in. More activity was reported compared to the beginning of the week.