Moody's confirms Couche-Tard

Moody's Investors Service said it confirmed Alimentation Couche-Tard Inc.'s Ba1 senior subordinate rating as the company has abandoned its $2 billion all-cash bid for Casey's General Stores, Inc.

The outlook has been revised to stable.

The rating was placed under review for downgrade on April 12, as the bid had the potential to elevate the company's adjusted leverage to over 4x, Moody's said.

Couche-Tard chose to let the bid expire rather than engage in a bidding war following the presentation of a higher offer by 7-Eleven, according to the agency, which now expects the company's adjusted leverage to remain between 3 times and 3.5 times through the near term.

The Ba1 senior subordinate rating considers the company's significant economies of scale due its size as one of the largest players in the highly fragmented convenience store industry, the agency said.

Credit challenges include sales concentration in the high-volume, low-margin categories of gasoline and tobacco, the significant capital investment needed to maintain an appealing store base and the company's appetite for leveraged acquisitions, Moody's noted.

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