Fitch Ratings Affirms Best Buy's IDR at 'BBB+'; Outlook Stable

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed Best Buy Co., Inc. (Best Buy) as follows:

--Issuer Default Rating (IDR) 'BBB+';

--Bank credit facility 'BBB+';

--Convertible subordinated debentures 'BBB'.

Fitch also has assigned a prospective rating of 'BBB+' to Best Buy's proposed $2 billion five-year unsecured revolving credit facility. The Rating Outlook is Stable. Approximately $665 million of debt is affected by these actions.

These actions follow Best Buy's announcement of a $5.5 billion share repurchase program and 30% dividend increase, which are expected to be neutral to the company's credit metrics. The ratings continue to reflect Best Buy's leading market position and customer-driven innovation, which have differentiated the company from its competitors and produced solid operating results, as well as the intense competition in the consumer electronics sector and changes in consumer spending and technology trends over time.

Best Buy plans to repurchase approximately $3.5 billion of shares in fiscal 2008, of which $412 million was repurchased in the first quarter. Of the $5.5 billion share repurchase program, $3 billion is expected to be completed through accelerated share repurchase agreements, which will be funded with proceeds from the sale of Best Buy's short-term investments, existing cash and an interim bank bridge facility until the revolver is established and the investments are liquidated.

As a result, debt levels are anticipated to remain around current levels over the intermediate term. Stable debt levels combined with Best Buy's solid operating performance, driven by the company's leadership in the consumer electronics sector, should result in steady credit metrics over time. For the latest twelve months ended June 2, 2007, adjusted debt/operating EBITDAR and EBITDAR coverage of interest and rents were 2.0 times (x) and 4.4x, respectively. Fitch expects Best Buy will remain prudent in its financial management, and expects the remaining $2.5 billion of share repurchases to be funded with excess cash and future cash flow generation.

Best Buy continues to face intense competition in the consumer electronics sector as discounters expand their consumer electronics offerings at low prices and other consumer electronics retailers implement similar operating strategies. In addition, the company remains vulnerable to changes in technology trends and consumer spending. However, customer centricity programs, productivity initiatives and solid vendor relationships should enable the company to remain competitive.

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