Best Buy Junk Rating's False Foundation

Tickers in this article: AMZN BBY COST DELL MSFT WMT

Updated to include additional data and January Fitch commentary .

NEW YORK ( TheStreet) -- Best Buy (BBY) 's junk bond ratings from Standard & Poor's and Fitch appear to have penalized the struggling big box electronics retailer for a takeover deal that never took place .

In the wake of company founder Richard Schulze's failed effort to take Best Buy private, which ended without a bid in late February, many stock analysts are taking the company's declining losses and a commitment to a new pricing strategy as reason to believe the company can survive competition from online retailer Amazon (AMZN) and pressure from the likes of Wal-Mart (WMT) and Costco (COST) .

That's not necessarily the case at Standard & Poor's and Fitch Ratings, however.

The credit ratings agencies seem to have moved on from downgrades of Best Buy's bonds to "junk" status in early August when Schulze unveiled a thin proposal to take the company private for up to $8.8 billion, with little explanation.

As it turns out, S&P now says in a few sentences Best Buy's junk rating has nothing to do with Schulze's buyout plan, meaning the lack of a formal offer is immaterial to the company's current rating.

But the agency's August cut explicitly focused on Best Buy's debt-fueled takeover proposal as cause for the company's move from investment grade to junk.

"The rating action is a result of founder and largest shareholder, Richard Schulze's proposal to acquire the company for a purchase price in the range of $24.00 to $26.00 per share," wrote S&P in its Aug. 6 downgrade of Best Buy from investment grade.

Fitch also referenced Schulze's proposal as a part of its Aug. 6 downgrade of Best Buy to a sub investment grade rating. The ratings agency's analysts cited "the possibility of a leveraging transaction" following Schulze's proposal.

Still, Fitch noted the takeover deal was a secondary factor to its "assessment that Best Buy's business profile, including its weakening comparable store sales, recent margin pressure that Fitch believes will continue, and heightened event risk, is no longer consistent with an investment grade rating."

Both agencies also wrote that if a takeover were to occur, it would trigger further downgrades.

However, when the agencies moved lockstep once more on Nov. 21 in cutting Best Buy further into junk territory, they scarcely made reference to Schulze's outstanding takeover proposal, despite ongoing reports that he was arranging a deal with large private equity firms.

Instead, S&P and Fitch focused almost exclusively on disastrous third quarter earnings report and weak holiday season guidance .

Since the Nov. 21 cuts, which put Best Buy ratings at BB and BB- at S&P and Fitch, respectively, neither agency sees reason to reassess the company's financial picture.