Moody’s rates Albertsons notes B3

Moody's Investors Service said it assigned a B3 rating to Albertsons Cos. LLC's proposed offering of $750 million senior unsecured guaranteed notes.

The B3 rating on the company's existing senior unsecured guaranteed notes and Safeway Inc. legacy notes, as well as the Ba2 rating on its existing senior secured term loans, are unchanged.

The outlook remains stable.

Albertsons intends to use proceeds from the notes offering to partially prepay its senior secured term loan due 2023 and repay borrowings under its revolving credit facility.

Although the new senior unsecured notes will be guaranteed by all wholly owned subsidiaries of Albertsons and therefore will be structurally senior to the Safeway legacy notes, their B3 rating is the same as the Safeway legacy notes. This reflects the significant amount of senior capital ahead of these notes, Moody’s said.

The proposed notes will be junior to the $4 billion ABL (which had a borrowing base of about $3.65 billion at June 18), about $6 billion in senior secured term loans (after the proposed prepayment) and a significant amount of senior priority trade payables in Moody's Loss Given Default model. The Safeway legacy notes, along with the $1,776,000,000 unsecured New Albertsons Inc. notes (unrated) are unsecured and non-guaranteed and therefore the junior most debt in the capital structure.

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