Home Depot writes down HD Supply

Home Depot built HD Supply into a $12 billion division before selling it in 2007. But this week, the retailer wrote down its HD Supply investment to zero.

Home Depot built up the heavy-duty building and infrastructure supplier, which reached its peak when Bob Nardelli was CEO of the Atlanta-based retailer. In an effort to focus on its core retail strengths, the company sold HD Supply for $8.5 billion -- one of the first major moves of CEO Frank Blake -- while keeping a 12.5% investment in the company.

"We hold a 12.5% equity investment in HD Supply, but have written that investment down to zero as we believe it has been other than temporarily impaired," said Home Depot CFO Carol Tome, during the retailer's fourth-quarter earnings call this week.

The  Atlanta Journal-Constitution reported  HD Supply CEO Joe DeAngelo was surprised and irritated by the assessment.

According to Tom Gray, a senior analyst with Global Credit Services, the write-down comes at a very bad time for HD Supply.

"Obviously, perception of the company will be marred by the write-down," he wrote in a research note. "And the timing couldn't be worse for HD Supply." He said HD Supply had recently entered talks with banks regarding extending certain credit facilities. 

Still, Gray wrote that he did not see any "negative impact on the company's operations or liquidity as a result of this action."

Earlier this week, the company announced it is talking to banks about extending more than $3 billion in credit facilities that come due in 2012.