S&P rates Kroger notes BBB

S&P said it assigned a BBB rating to Kroger Co.'s proposed $1.2 billion senior unsecured notes, which the company will issue in 10-year and 30-year tranches.

The transaction is expected to be leverage neutral because the company will use the proceeds to refinance $1.3 billion of debt that has matured or will mature during the fiscal year ending Feb. 2, the agency said.

S&P said it will continue to closely monitor Kroger's operating performance because its credit metrics remain elevated, including its lease-adjusted leverage metric in the mid-3x range.

The notes will rank equally with the company's other senior unsecured debt, the agency said.

Kroger also announced a partnership with Microsoft Corp. to further leverage cloud technology in its stores to track products and expedite its customers' shopping trips, S&P said.

This fits with management's plan to grow the company's alternate profit streams to help reach its publicly stated goal of generating $400 million of incremental operating profit from 2018 through 2020, the agency said.

While Kroger has traditionally maintained a conservative financial policy, its recent moves have been more aggressive and focused on shareholder returns and selective mergers and acquisitions, S&P added.

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