Moody's may downgrade Nash Finch

Moody's Investors Service said it placed Nash Finch Co.'s ratings under review for possible downgrade, including the B1 corporate family rating, B1 $125 million senior secured revolving credit facility due 2009, B1 $175 million senior secured term loan due 2010 and B3 $322 million 3.5% convertible subordinated notes due 2035.

The agency said the review was prompted by the ongoing discussion with the Securities and Exchange Commission regarding potential insider trading by some company officers and directors, the abrupt departures of the chief executive officer and general counsel and the apparent challenges in filling the CEO position.

Moody's noted that these corporate governance developments occur during a period of weaker operating performance for Nash Finch subsequent to the March 2005 acquisition of two distribution centers and increased prominence of non-traditional grocery retailing competitors. For the 12 months ended Oct. 8, leverage was about 4.5x, free cash flow to debt was 5% and EBIT to interest expense was about 2.3x.

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