S&P rates Kroger notes BBB

S&P said it assigned its BBB issue-level rating to Kroger Co.’s proposed senior unsecured notes due 2050. The agency expects the transaction to be leverage neutral because the company plans to use the proceeds to repay debt and for general corporate purposes. Pro forma for the transaction, S&P expects the company’s S&P-adjusted debt leverage to remain unchanged at about 3.7x.

“We project that Kroger will continue to execute its operational plans, including Restock Kroger, to increase its profits and cash flow in the next several quarters. We expect the company’s S&P-adjusted leverage to improve to the mid-3x area by the end of the year (equivalent to the high end of the company’s target range of 2.3x-2.5x). We anticipate that the benefits from management’s cost-savings initiatives and the winding down of its business investments will offset the price investments and cost headwinds related to its pharmacy segment and labor in the near-term,” the agency said in a press release.

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