Moody's rates Orchard Supply loan B1

Moody's Investors Service said it assigned a B1 corporate family rating to Orchard Supply Hardware Corp. and a B1 rating with a loss-given-default assessment of LGD5 (73%) to its $200 million senior secured term loan due 2014.

The outlook is stable.

The agency said Orchard Supply's ratings reflect its small size, geographic concentration in California, the competitive landscape, leverage that is moderate for the rating category and the absence of any tangible support from its 80.1% owner Sears, Roebuck and Co.

The ratings are supported by the potential for future shareholder enhancements from Sears and from 19.9% owner Ares Management and by the company's solid position within its home California market, its breadth of product and its success as a smaller-scale alternative to the home improvement superstores, focusing more on repair and maintenance projects than on the more complex home improvement "solutions" market, Moody's said.

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