S&P rates Sharp Holdings B-, loans B, CCC

Standard & Poor's said it assigned its B- corporate credit rating to Sharp Holdings Corp., the corporate parent of Smart & Final Inc. following its acquisition by an affiliate of Apollo Management LP.

The outlook is stable.

At the same time, the agency said it assigned a B bank loan rating to the company's proposed $360 million first-lien term loan due 2014, with a recovery rating of 1.

At closing of the transaction, the company will have $200 million drawn under its first-lien term loan while the remaining $160 million has been reserved for a potential acquisition and S&P said it assumes that the company will draw the balance before its availability expires at the end of 2007.

In addition, S&P said it assigned a CCC bank loan rating to the planned $175 million second-lien term loan due 2014, with a recovery rating of 5.

The ratings on Sharp Holdings, which will be the holding company of Smart & Final Inc., reflect its participation in the highly competitive retail grocery and foodservice distribution industries, narrow geographic reach, small EBITDA base and thin operating margins, as well as very highly leveraged capital structure and weak cash flow protection measures after the transaction, the agency added.

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