Moody's affirms Dollar General

Moody's Investors Service said it affirmed Dollar General Corp.'s corporate family rating at B3 following the company's news of revisions to its proposed capital structure, notably KKR increasing its equity investment to $2.775 billion with a corresponding reduction in proposed debt to $4.7 billion.

The ratings affirmed include its corporate family rating at B3, probability of default rating at B3, $2.43 billion term loan B at B3 with LGD3-44%, $1.35 billion senior unsecured notes at Caa1 with LGD4-68%, $550 million senior subordinated notes at Caa2 with LGD6-94%, speculative grade liquidity rating at SGL-3.

The Ba2 rating on the $200 million of 8.625% senior unsecured notes remains on review for possible downgrade. The notes are expected to be redeemed upon closing of the acquisition.

The outlook remains stable.

The rating and stable outlook primarily reflects Dollar General's weak capital structure pro forma for the company's acquisition by KKR, the resulting weak credit metrics predominantly appropriate for the Caa rating level, and the company's need to address its recent weak operating margins, the agency said.

The rating category also reflects an expectation that credit metrics will remain weak, split between the Caa and B rating levels, over the next 18 months as a result of its weak capital structure and the time it will take for the company to address its operating margin performance, Moody's added.

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