PHOENIX — PetSmart’s plans to separate itself from its e-commerce subsidiary, Chewy Inc., is not going quite as planned.

The retailer, owned and led by private equity BC Partners, announced in late October it had presented a joint junk-rated bond and leveraged loan offering to shareholders with hopes to refinance $4.65 billion in debt, as reported by Bloomberg.

However, PetSmart’s aggressive proposal did not entice buyers.

Scott Josefsberg, head of special situations research at Covenant Review, commented on the turn of events.

"PetSmart’s proposed split up of PetSmart and Chewy was a continuation of maneuvers PetSmart began in 2018 to remove Chewy from the reach of its creditors,” Josefsberg said. “The purpose of splitting up the two companies is for PetSmart to divert value to its shareholders at the expense of its creditors by giving PetSmart’s shareholders direct ownership of Chewy shares (rather than PetSmart owning the shares).  Creditors rejected the proposal because they didn’t like the idea of PetSmart as a standalone credit ex-Chewy.  It’s not clear whether PetSmart will still try to transfer Chewy to its shareholders despite the failed refinancing effort."

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