Moody's rates Albertson's loans Ba3, notes B2

Moody's Investors Service said it assigned a B1 corporate family rating and a B1-PD probability of default rating to Albertson's Holdings LLC, Ba3 (LGD3) ratings to its proposed $1.52 billion senior secured term loan due 2019 and proposed $3.04 billion senior secured term loan due 2021 and a B2 (LGD4) rating to its proposed $1.63 billion senior secured notes due 2022. The outlook is stable.

The proceeds of the proposed debt will be used to acquire Safeway Inc.

The agency said that although a transaction of this size comes with significant execution and integration risks, the combination of Albertson's and Safeway creates the second-largest supermarket chain in the United States with a large scale and significant opportunities to create synergies and supply chain efficiencies that could enhance profitability and top-line growth. The B1 corporate family rating is also supported by the company's significant store ownership and very good liquidity, Moody’s said.

Although Albertson's pro forma credit metrics will be weak at closing, Moody’s expects them to improve significantly in the near to medium term. The agency expects the ratio of debt to EBITDA to be about 5.75 times within 18 months of closing.

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