Moody's lifts A&P to SGL-2

Moody's Investors Service said it raised Great Atlantic and Pacific Tea Co.'s speculative-grade liquidity rating to SGL-2 from SGL-3 and affirmed its corporate family and probability-of-default ratings at B3, its senior convertible notes and senior unsecured notes at Caa1 (LGD5, 78%) and its senior secured notes at B3 (LGD3). The loss-given-default rate assigned to the senior unsecured notes was changed to 46% from 45%.

The outlook remains negative.

The agency said the upgrade reflects A&P's improved liquidity following the issuance of $260 million of senior secured notes and $175 million of preferred equity. The proceeds were used to repay borrowings under the revolving credit facility and enhance cash balances.

The ratings reflect A&P's slim operating margins, weak credit metrics, geographic concentration and the intensely competitive nature of the supermarket industry, Moody's said.

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

The negative outlook reflects Moody'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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