Moody's rates new A&P revolver Ba3

Moody's Investors Service said it assigned a rating of Ba3 to the new $400 million secured revolving credit facility of The Great Atlantic & Pacific Tea Co. Inc (A&P), upgraded the speculative grade liquidity rating to SGL-2 from SGL-3, and confirmed all other fundamental ratings.

Moody's said the upgrade of the speculative grade liquidity rating reflects Moody's belief that the company may run a free cash flow deficit over the next 12 months, but less stringent covenants in the new bank loan relative to the replaced bank loan combined with good liquidity resources from about $90 million in excess cash and around $290 million in revolver availability (as of Nov. 29) allow the company to comfortably meet its short-term operating and financial obligations.

Benefiting the fundamental ratings are the company's good liquidity position, success at maintaining vendor support, and important market positions in its core markets of the New York metro area and southern Ontario.

However, Moody's said, the inability to make progress at improving weak operating margins, continued weak performance at the non-core supermarket divisions, and weak return on assets limit the ratings.

The outlook continues to be negative.

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