S&P cuts Marsh Supermarkets ratings

Standard & Poor's said it lowered its ratings on Marsh Supermarkets Inc., including the corporate credit rating to B+ from BB-, the secured bank loan to B+ from BB-, and the senior subordinated notes to B- from B.

The outlook is stable.

S&P said the rating action reflects the company's continued weak sales and earnings due to competitive store openings and the weak economy.

While Marsh continues to reduce costs and lower debt levels, weak operating trends have resulted in EBITDA coverage of interest trending in the mid-1x area, compared with 2x in 2001. In addition, total debt to EBITDA is trending over 6.0x, compared with 4.4x in 2000.

S&P said the stable outlook assumes somewhat weak operating trends may continue through the remainder of 2003, but will begin to at least stabilize early in 2004.

The company's lease-adjusted operating margin is at about 4.2%, compared with 4.9% in fiscal 2001. Lease-adjusted EBITDA interest coverage is trending at 1.6x, compared with 2.2x in fiscal 2001. Total debt to EBITDA is more than 6.0x.

Although S&P said it believes Marsh will be challenged to improve these measures over the near term, the company has identified about $30 million of improvements that, if achieved, could help offset continued weak market conditions.

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