Moody's: Great A&P outlook negative

Moody's Investors Service said it revised Great Atlantic and Pacific Tea Co., Inc.'s outlook to negative from stable and affirmed its corporate family and probability-of-default ratings at B3 and its senior unsecured notes and senior convertible notes at Caa1 (LGD 5, 73%).

The agency said the change in outlook reflects concerns that the company's already thin operating margins may be further reduced by the continuing trend of negative same-store sales, which could jeopardize already weak credit metrics and cash flow generation. Great A&P has not demonstrated anticipated improvement in credit metrics since its acquisition of Pathmark despite having achieved expected synergies, Moody's noted.

The affirmation reflects Moody's expectation that the company will be able to maintain a debt-to-EBITDA ratio below 6.5 times despite earnings pressure as well as modestly positive free cash flow.

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