Halister News

--VINCE GOLLE

(Bloomberg) -- Treasury Dept’s Financial Crimes Enforcement Network in statement proposes prohibiting U.S. financial institutions from maintaining accounts for Bank of Dandong after concluding that the China-based company has acted as a gateway for money laundering by North Korea. 

• Bank of Dandong has reportedly helped facilitate millions of dollars for companies engaged in North Korea WMD, ballistic missile programs, as described in Notice of Proposed Rulemaking issued pursuant to Section 311 of USA Patriot Act: Treasury
  • Treasury Sec. Steven Mnuchin: “The Department of the Treasury is committed to protecting the U.S. financial system from North Korean abuse and maximizing pressure on the Government of North Korea until it abandons its nuclear and ballistic missile programs"
• Treasury’s Office of Foreign Assets Control also designates company Dalian Global Unity Shipping as well as Chinese citizens Sun Wei, accused of running a cover company on behalf of North Korea’s Foreign Trade Bank, and Li Hong Ri, who has reportedly established front cos. to conduct transactions for North Korea

To contact the reporter on this story: Emily McCormick in Washington at emccormick14@bloomberg.net To contact the editors responsible for this story: Derek Wallbank at dwallbank@bloomberg.net Joi Preciphs

(Bloomberg) -- Staples long-term rating of Baa2 will likely be downgraded to junk assuming proposed $6.9b acquisition by Sycamore closes as generally stated, Moody’s analyst Charles O’Shea says in a report. S&P also puts BBB- corporate rating on watch for downgrade as it expects a “very meaningful” increase in debt.

• Other ratings on review for downgrade by Moody’s include senior unsecured commercial paper, senior unsecured bonds
• Moody’s assumes “significant levels” of new debt to finance the buyout
• Bloomberg Intelligence analyst Noel Hebert says by phone that deal can be done with “a pretty low leverage number” and Staples should still be able to delever by 0.25-0.5 turns a year since it generates so much free cash flow
  • With $1.5b equity contribution, Staples would be levered ~4.25-4.5x, which means on a secured basis they’d probably be rated BB or BB- for unsecured: Hebert
  • Sycamore deal may allow Staples to explore M&A opportunities in expanding its B2B operations, but it depends if they want to run business for growth or cash; Hebert cites Uline Inc., distributor of packaged materials, as a possible name of interest
• Transaction would likely trigger change-of-control covenants in Staples debt, according to independent credit research firm Covenant Review
  • This would require co. to buy back 2023 bonds at 101, assuming it’s cut to junk in connection with the change of control
  • 2018s likely to be redeemed due to upcoming maturity, while 2023s likely subject to 101 put: Cov. Review
  • Possible Sycamore will try to circumvent the below- investment-grade rating provision and avoid the buyback, by providing collateral and guarantees to head off downgrades; on balance, though, change-of-control protection seems effective

To contact the reporter on this story: Molly Smith in New York at msmith604@bloomberg.net To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net Rick Green, Kenneth Pringle

--DEREK WALLBANK