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NEW YORK (AP) — Moody's Investors Service downgraded its credit rating on BJ's Wholesale Club Inc. on Monday because it said the retailer plans to increase its debt to pay for an upcoming dividend.
The rating agency said the privately held retailer has proposed raising about $690 million in new debt to pay for a $643 million dividend to its owners, Leonard Green Partners and CVC Capital Partners. The two private equity firms completed their $2.8 billion acquisition of the wholesale club in September 2011.
A representative for BJ's could not immediately be reached for comment.
The rating agency downgraded BJ's rating deeper into junk by one notch, to B2 from B1. Moody's said the rating outlook is negative, saying it could downgrade the company again if it took on even more debt.
Having lower-rated debt can mean that a company has to pay more to borrow money.
BJ's is based in Westborough, Mass. It operates nearly 200 wholesale clubs, primarily in the Northeastern U.S.