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PetSmart Lenders Are Worried About a Chewy.com Spinoff

  • Notes financing takeover of online site among worst performers
  • Blue Buffalo steps back amid concern about sales concentration
A vehicle drives past a PetSmart Inc. store in LaSalle, Illinois.

A vehicle drives past a PetSmart Inc. store in LaSalle, Illinois.

Photographer: Daniel Acker/Bloomberg

Buying Chewy.com was supposed to be a coup for PetSmart Inc. For debt investors who funded the deal, it’s been more like a dog.

Within months of the May acquisition, PetSmart lost some of its mojo with a key supplier, and then lost its chief executive. The notes sold by the pet superstore to finance the takeover of Chewy Inc. are among the year’s worst performers for newly issued junk debt, with some of its unsecured bonds having lost around a quarter of their value since being issued.