Moody’s Investor Service said Monday it has assigned a Ba2 rating to Albertsons Co.’s proposed $1.5 billion term loan and a B3 rating to its proposed $1.25 billion senior unsecured notes, with expectations the chain’s credit metrics will continue to improve.
Proceeds from the new term loan and new notes will be used to refinance the Boise, Idaho, company’s second lien notes that mature in 2022 and senior secured term loans maturing in 2019 actions Moody’s said will further simplify the company’s capital structure.
Moody’s said it also upgraded the rating of Albertsons’ existing senior secured term loans maturing in 2021 to Ba2 from Ba3; downgraded the Safeway legacy notes to B3 from B2; and affirmed all other ratings, including the company’s B1 corporate family rating and B1 PD probability of default rating.
Moody’s also said it is retaining its stable rating outlook on Albertsons, noting it expects identical-store sales to continue to be positive and EBIT margins to improve, along with the company’s credit metrics.
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According to Moody’s, “Although the company has outperformed expectations, its credit metrics remain weak, with debt to EBITDA adjusted for leases and pension liabilities at about 7.5 times at the end of fiscal 2015.
“However, we expect momentum in same-store sales growth and cost efficiencies to continue to boost profitability, resulting in improved credit metrics, with debt to EBITDA expected to approach 6 times in the next 12 to 18 months.
“Although the integration of the Safeway acquisition still has execution and integration risks, management continues to execute well, and the combined company significant opportunities to create synergies and supply chain efficiencies that could further enhance profitability and top line growth.”
Date: May 23, 2016