Toys R Us
filed to issue new debt securities on Monday even as its current notes were cut to junk-bond status.
The toy retailer did not immediately specify how many securities it would sell or what interest rate it would pay on them. Instead, the company's filing with the
Securities and Exchange Commission
was for a so-called shelf registration that will allow it to sell securities worth up to $800 million in various increments in the future.
Toys R Us said it would use the proceeds from the sale to pay down debt and for "corporate purposes," such as working capital, capital expenditures and possible acquisitions.
As of Feb. 1, Toys R Us owed $2.14 billion in long-term debt, compared with about $1.02 billion in cash. About $800 million of its debt is due in January and February of next year, according to Fitch Ratings.
Although the toy retailer should have enough cash and credit to fund its working capital needs, Fitch cut the company's debt rating on its senior unsecured from an investment grade BBB- to a speculative grade BB+, and cut the rating on the company's commercial paper from investment grade F3 to speculative grade B.
Toys R Us' debt-to-earnings ratio has climbed over the last year as the company has struggled, Fitch noted.
"The downgrade reflects
Toys R Us' soft operating results, and the expectation that its operations will continue to be negatively impacted by the weak retail environment and growing competitive pressure from
," Fitch said in a statement.
Excluding one-time charges, Toys R Us' earnings
fell in the fourth quarter, its most important period, as the company saw disappointing sales.
Following the downgrade, Fitch said its ratings outlook for the Paramus, N.J.-based company was stable.