Updated to include additional data and January Fitch commentary.
NEW YORK ( TheStreet) -- Best Buy (BBY)'s junk bond ratings from Standard & Poor's and Fitch appear to have penalized the struggling big box electronics retailer for a takeover deal that never took place.
In the wake of company founder Richard Schulze's failed effort to take Best Buy private, which ended without a bid in late February, many stock analysts are taking the company's declining losses and a commitment to a new pricing strategy as reason to believe the company can survive competition from online retailer Amazon (AMZN) and pressure from the likes of Wal-Mart (WMT) and Costco (COST).
That's not necessarily the case at Standard & Poor's and Fitch Ratings, however.The credit ratings agencies seem to have moved on from downgrades of Best Buy's bonds to "junk" status in early August when Schulze unveiled a thin proposal to take the company private for up to $8.8 billion, with little explanation. As it turns out, S&P now says in a few sentences Best Buy's junk rating has nothing to do with Schulze's buyout plan, meaning the lack of a formal offer is immaterial to the company's current rating. But the agency's August cut explicitly focused on Best Buy's debt-fueled takeover proposal as cause for the company's move from investment grade to junk. "The rating action is a result of founder and largest shareholder, Richard Schulze's proposal to acquire the company for a purchase price in the range of $24.00 to $26.00 per share," wrote S&P in its Aug. 6 downgrade of Best Buy from investment grade. Fitch also referenced Schulze's proposal as a part of its Aug. 6 downgrade of Best Buy to a sub investment grade rating. The ratings agency's analysts cited "the possibility of a leveraging transaction" following Schulze's proposal. Still, Fitch noted the takeover deal was a secondary factor to its "assessment that Best Buy's business profile, including its weakening
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