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Moody’s cuts Tops PDR, rates notes Caa3
Moody's Investors Service said that if the exchange offer announced by Tops Holding II Corp. (HoldCo), on July 10 proceeds as outlined, it will constitute a distressed exchange, which is an event of default under Moody's definition of default.
As a result, the agency downgraded the company's probability of default rating to Ca-PD from Caa1-PD and affirmed its corporate family rating at Caa1.
Moody's also affirmed the Caa3 rating of the senior unsecured notes maturing 2018 and the Caa1 rating of the senior secured notes maturing 2022.
Additionally, the agency assigned a Caa3 rating to the proposed new senior unsecured notes maturing 2021. These notes will be issued at the Tops Holding LLC (OpCo) level.
Moody’s said it expects to upgrade the probability of default rating to Caa1-PD/LD upon the closing of the exchange offer. Subsequently the LD designation will be removed after three business days.
The outlook was changed to negative from stable.
"We view Tops' proposed exchange as necessary as it will not have enough liquidity to repay the HoldCo notes that mature in June 2018, and we believe it enhances liquidity as it takes one meaningful maturity off the table for the next three years," Moody's vice president Mickey Chadha said in a news release.
"However Tops' liquidity remains weak and credit metrics have deteriorated with debt to EBITDA increasing to 8.3 times at the end of the first quarter of fiscal 2017 from 6.6 times at the end of fiscal 2014 with EBIT/interest currently at less than 1.0 times. The company's ability to improve EBITDA and metrics will remain highly constrained in the current challenging business environment for food retailers."
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