Moody's drops A&P

Moody's Investors Service said it downgraded the speculative-grade liquidity rating of the Great Atlantic and Pacific Tea Co. to SGL-4 from SGL-3 and affirmed its Caa3 probability of default rating and Caa2 corporate family rating, as well as other debt ratings.

The downgrade of the SGL rating to SGL-4, reflecting weak liquidity, results from unexpectedly poor operating results in the first quarter of the current fiscal year, the agency said.

According to Moody's, A&P does have sufficient liquidity to meet immediate operating needs, but liquidity is strained over the next four quarters as a result of the company's debt maturity in June 2011.

The long-term ratings continue to reflect its expectation that A&P's sales performance and profit margins are unlikely to recover quickly from their recent weak levels, and that cash flow and credit metrics are, therefore, likely to remain extremely weak, the agency said.

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