Moody's ups A&P liquidity to SGL-1

Moody's Investors Service said it confirmed the ratings of The Great Atlantic & Pacific Tea Co. Inc., including the B3 long-term corporate family rating, Caa1 senior unsecured notes and bonds, Caa2 multi-seniority shelves, Caa3 preferred stock and the Caa2 trust preferred securities shelf of A&P Finance I, A&P Finance II and A&P Finance III.

The agency also upgraded the company's speculative grade liquidity rating to SGL-1 from SGL-3 and assigned a stable outlook.

The confirmation is based upon Moody's view that the positive impact on credit metrics from the recent reduction in debt and the significant increase in liquidity from asset sale proceeds is not sufficient to offset weak comparable-store sales in the face of intense competition and low profitability in the company's U.S. operations.

The company's SGL-1 rating reflects Moody's expectation that the company will have very good liquidity over the next 12 months. While the company is expected to continue to invest aggressively in capital expenditures to upgrade its store base, cash balances of $639.5 million at Sept. 10 will remain sufficient to fund likely free cash flow deficits and to collateralize letters of credit, with substantial cushion, the agency said.

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