PetSmart Inc. and its parent holding company sued Citibank NA, in an escalation of the fight between the retailer and a group of lenders over the transfer of shares in PetSmart’s Chewy.com e-commerce unit, the Wall Street Journal reported. Earlier this month, the pet-products retailer transferred a 20 percent stake in Chewy.com, its fast-growing e-commerce subsidiary, to its parent holding company, Argos Holdings Inc., which is controlled by private-equity firm BC Partners. At the same time, PetSmart also transferred a 16.5 percent holding to a wholly owned subsidiary. On Tuesday, PetSmart sued Citibank, the agent on the company’s term loans, for refusing to bless the transfers of shares that puts them out of the reach of its lenders and within the grasp of its private-equity owner BC Partners. The transfer of the 20 percent stake to PetSmart’s parent company would give BC Partners control over the proceeds of any sale of those shares. At the same time, the company could pledge the other 16.5 percent stake to low-ranking debtholders in a debt swap. PetSmart has been steadily losing customers at its brick-and-mortar stores for several quarters, raising questions about its ability to service over $8 billion in debt. At the same time, its Chewy.com e-commerce subsidiary has been growing rapidly, though continuing to lose money. A valuation expert hired by PetSmart assessed Chewy.com to be worth between $4.15 billion and $4.75 billion, a big jump from the $3 billion purchase price PetSmart paid last year, according to the lawsuit.
