Moody's rates A&P notes B3

Moody's Investors Service said it assigned a B3 (LGD3, 45%) rating to the proposed $225 million senior secured second-lien notes of Great Atlantic and Pacific Tea Co. and affirmed the corporate family and probability-of-default ratings at B3, senior convertible notes and senior unsecured notes at Caa1 (LGD5) and the speculative-grade liquidity rating at SGL-3.

The loss-given-default rate assigned to the existing notes was revised to 78% from 73%.

The outlook remains negative.

The agency said the rating on the new notes recognizes their second-priority claim to assets securing the revolving credit facility and the benefit of subsidiary guarantees.

The other ratings reflect slim operating margins, high leverage and weak interest coverage, Moody's said, as well as A&P's geographic concentration and the intensely competitive nature of the supermarket industry.

The ratings are supported by the company's adequate liquidity and good regional market position, Moody's said.

The negative outlook reflects the agency's concerns that A&P's already thin operating margins may be further reduced by the continuing trend of negative same-store sales.

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