Fitch Rates Staples S-T IDR 'F2'; 'BBB+' L-T IDR Remains on Watch Negative

Business Wire, June 9, 2008

CHICAGO -- Fitch Ratings has assigned the following short-term ratings for Staples, Inc. (Staples):

-- Short-term IDR 'F2';

-- Commercial Paper 'F2'.

In addition, Staples' long-term ratings remain on Rating Watch Negative by Fitch as follows:

-- Long-term IDR 'BBB ';

-- Bank credit facility 'BBB ';

-- Senior notes 'BBB '.

The Rating Watch Negative status will be resolved when the outcome of Staples' proposed acquisition of Corporate Express N.V. (Corporate Express), a Netherlands-based office products company, is known. If Staples is successful in its acquisition of Corporate Express as currently structured, Fitch expects to downgrade its ratings on Staples to 'BBB'. If Staples is not successful, Fitch expects to affirm and remove Staples' 'BBB ' ratings from Rating Watch Negative.

The proposed acquisition represents an enterprise value of approximately $4.7 billion, which includes Corporate Express' $1.7 billion of debt. As of June 4, 2008, Staples owned 12.3% of the shares of Corporate Express and has an outstanding tender offer for the remaining shares at EUR 9.15, which expires on June 27, 2008. Staples ownership combined with the previous commitments from shareholders of Corporate Express to tender their shares, gave Staples 35.6% of the outstanding ordinary share capital of Corporate Express.

Fitch expects the all cash proposal to be funded with a combination of debt, operating cash flow and cash on the balance sheet which totaled $1.2 billion as of May 3, 2008. As a result, the combined company's pro forma adjusted leverage, as defined by adjusted debt/operating EBITDAR, is expected to increase to over 3.0 times (x), and EBITDAR coverage of interest and rents to decline to under 3.0x. However, Fitch expects Staples to remain disciplined in its financial strategy and use future cash flow generation to reduce debt levels over time.

The proposed acquisition of Corporate Express will expand Staples' North American delivery business, which is one of its fastest growing segments, allow Staples to enter new international markets, and provide an opportunity for synergies. Corporate Express generates 52.7% of its $8.7 billion in revenues from its North American delivery business with the remainder in Europe and Australia. With this increased international presence, Staples will enter new markets such as Australia and expand the company's contract business to 21 countries.

Of concern to Fitch is Staples' ability to successfully integrate the acquired operations given its broad geographic scope and the potential challenges in growing its international footprint. In addition, Fitch anticipates that the acquisition will produce economies of scale in areas such as sales force, marketing and purchasing given Staples' 10.8% operating margin in its North American Delivery segment compared to Corporate Express' 2.6% margin in this market.

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