Moody’s rates Albertsons, facilities, notes

Moody's Investors Service said it assigned a B1 corporate family rating and B1-PD probability of default rating to Albertsons Cos., Inc.

The agency also assigned a Ba1 rating to the company's new proposed $5 billion ABL revolving credit facility, Ba2 rating to its new proposed $1.2 billion FILO term loan and Ba2 rating to its new senior secured notes that are expected to refinance the new proposed $1.2 billion senior secured bridge facility.

Additionally, Moody's assigned an SGL-1 speculative grade liquidity rating.

The outlook is negative.

Proceeds from the new credit facilities will be used to finance Albertsons' acquisition of Rite Aid Corp. and to repay Rite Aid debt.

The Ba2 rating of Albertsons Cos., LLC's existing term loan, the B3 rating of its unsecured notes and the B3 rating of the Safeway Inc.’s legacy notes are affirmed.

The transaction also anticipates the rollover of $423 million in legacy Rite Aid’s unsecured notes maturing 2027 and 2028 as part of the new capital structure. These notes were affirmed at Caa1, Moody’s said. If the transaction closes as anticipated these notes will be upgraded to B3.

Albertsons Cos., LLC's B1 corporate family rating, B1-PD probability of default rating, SGL-1 speculative grade liquidity rating were affirmed with a negative outlook and will be withdrawn at closing.

"The acquisition does not change Albertsons overall credit profile for the next 12 months as significant challenges within the food and drug retail subsectors are expected to continue to pressure margins and topline growth. The transaction comes with meaningful integration and execution risks at a time when Albertsons' standalone leverage is already very high, hence the negative outlook," Moody's vice president Mickey Chadha said in a news release.

"On the positive side, the transaction increases scale and creates significant synergies and the company has very good liquidity."

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