DBRS Limited (Morningstar DBRS) notes that The Home Depot, Inc. (Home Depot or the Company) has increased the maximum aggregate principal amount available under the Company's Commercial Paper Program (the CP Program) to $19.5 billion from $5.0 billion.

The $19.5 billion CP Program continues to include the CAD 250 million Home Depot of Canada Inc. CP Program, which is guaranteed by the Company. Morningstar DBRS confirmed Home Depot's Issuer Rating and Senior Unsecured Debt rating at 'A' and its Commercial Paper rating at R-1 (low). Morningstar DBRS also confirmed Home Depot of Canada Inc.'s Commercial Paper rating at R-1 (low). All trends remain Stable.

Morningstar DBRS understands that net proceeds drawn under the CP Program will be used for working capital and general corporate purposes including to support the anticipated financing of the Company's pending acquisition of SRS Distribution Inc. (the SRS Acquisition). Furthermore, Morningstar DBRS notes that, in support of the CP Program limit increase, Home Depot has also increased the maximum size of its committed bank facilities to $19.5 billion from $5.0 billion. These facilities serve as a back-up line of credit to the CP Program.

Based on its review, Morningstar DBRS is satisfied that the Company's revised CP Program limit and the credit facility continues to meet Morningstar DBRS' requirements with respect to commercial paper programs as outlined in 'Morningstar DBRS Global Corporate Criteria' and the Company's CP limit increase, does not affect Morningstar DBRS' assessment of the Company's credit profile.

KEY CREDIT RATING CONSIDERATIONS

Morningstar DBRS last confirmed Home Depot's credit ratings on April 3, 2024, with a Stable trend, following the Company's SRS Acquisition announcement. At the time, Morningstar DBRS noted that the credit rating actions reflect Morningstar DBRS' expectations that Home Depot's strong free cash flow generating ability and prudent financial management will support the Company's deleveraging plan, such that debt-to-EBITDA leverage would return toward the Company's publicly stated leverage target of 2.0 times (x) over a 24-month period, from pro forma leverage of approximately 2.5x at the close of the SRS Acquisition. Furthermore, Morningstar DBRS noted that the effects of the transaction on Home Depot's business risk profile should be moderately positive, considering that SRS' scale and market position should help Home Depot further consolidate its leading market position in the PRO segment.

Since then, Home Depot has reported results for the first quarter of F2024 (period ended April 28, 2024), which were broadly in line with Morningstar DBRS' expectations. Further, Morningstar DBRS' earnings and financial outlook remain broadly consistent with the expectations outlined in the press release associated with the confirmation on April 3, 2024.

CREDIT RATING DRIVERS

Morningstar DBRS may take a negative credit rating action if weaker-than-expected operating performance and/or more aggressive financial management policies result in credit metrics to weaken on a sustained basis (i.e., debt-to-EBITDA leverage above 2.5x). Conversely, and although highly unlikely given the economic climate and near-term increase in leverage, if Home Depot's earnings profile were to improve considerably and/or capital allocation were managed such that key credit metrics improve to levels considered strong for the current rating (i.e., debt-to-EBITDA structurally well below 2.0x), Morningstar DBRS may take a positive credit rating action.

CREDIT RATING RATIONALE

Home Depot's credit ratings are supported by its dominant market position, large scale, geographic diversification, and free cash-generating capacity. The credit ratings also reflect the intense competition and cyclicality of the home improvement retail industry as well as risks related to possible future growth strategies.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental, Social, or Governance factors that had a relevant or significant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024) https://dbrs.morningstar.com/research/427030/morningstar-dbrs-criteria:-approach-to-environmental,-social,-and-governance-risk-factors-in-credit-ratings.

BUSINESS RISK ASSESSMENT (BRA) AND FINANCIAL RISK ASSESSMENT (FRA)

(A)	Weighting of BRA Factors

In the analysis of The Home Depot, Inc., the relative weighting of the BRA factors was approximately equal.

(B)	Weighting of FRA Factors

In the analysis of The Home Depot, Inc., the relative weighting of the FRA factors was approximately equal.

(C)	Weighting of the BRA and the FRA

In the analysis of The Home Depot, Inc., the BRA carries greater weight than the FRA.

Notes:

All figures are in U.S. dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology:

Global Methodology for Rating Companies in the Merchandising Industry (15 April 2024)

https://dbrs.morningstar.com/research/431175/global-methodology-for-rating-companies-in-the-merchandising-industry

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (15 April 2024, https://dbrs.morningstar.com/research/431186/morningstar-dbrs-global-corporate-criteria), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies and criteria have also been applied:

Morningstar DBRS Global Corporate Criteria (15 April 2024)

https://dbrs.morningstar.com/research/431186/morningstar-dbrs-global-corporate-criteria

Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/427030 (23 January 2024).

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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