Daily News: June 16, 2014

Moody’s Assigns Ba3 Rating to NAI $850MM Term Loan

Moody’s Investor Service said it has assigned first-time debt ratings to New Albertsons — with a stable outlook — pending NAI’s proposed acquisition of Safeway’s Eastern division.

Moody’s initial ratings for NAI include a corporate family rating of B2; a probability of default rating of B2-PD; and a Ba3 rating to the company’s proposed senior secured term loan of $850 million, which will mature in 2021. Proceeds from the loan would primarily be used to acquire 124 stores in Safeway’s Eastern division in Baltimore and Washington D.C.

“Management has been successful in improving identical-store sales growth across all its grocery banners,” Moody’s said, “and the ratings reflect [the] expectation that profitability of the stores will improve as price investments lead to increased traffic and volume. Operating efficiencies initiated by management are also expected to reduce expenses and improve cash-flow generation.”

NAI, a division of AB Acquisition, operates 450 stores under the Acme, Jewel-Osco, Shaw’s and Star Market banners. The other division of AB Acquisition is Albertsons, which operates 633 Albertsons and United Supermarkets in the western half of the U.S.

According to Moody’s, “NAI’s credit metrics are weak, and it faces a challenging task of improving profitability with skittish consumers in a very price-competitive business environment. However, the initiatives undertaken by management in the last year have proven successful in stabilizing and improving the company’s operating performance, especially in light of the prolonged underperformance of the store base under its previous ownership.”