Approximately $2.5 billion of rated debt securities affected
New York, February 08, 2013 -- Moody's Investors Service today placed Dollar General Corporation's
long term ratings on review for upgrade. The Speculative Grade
Liquidity rating of SGL-1 remains unchanged.
The following ratings are placed on review for upgrade: (LGD assessments
are subject to change.)
Corporate Family Rating at Ba1
Probability of Default Rating at Ba1-PD
Senior secured term loan first out tranche at Ba1 (LGD 3, 43%)
Senior secured term loan first loss tranche at Ba2 (LGD 4, 68%)
Senior unsecured notes at Ba2 (LGD 5, 86%)
Senior unsecured shelf at (P) Ba2
RATINGS RATIONALE
The review for upgrade acknowledges the addition of two independent board
members resulting in the board of directors no longer being controlled
by KKR as Buck Holdings, LP (who is controlled by KKR) now owns
less than 20% of Dollar General. The review for upgrade
also acknowledges Dollar General's clearly stated financial policy,
the cornerstone of which is its announced 3.0 times lease adjusted
debt to EBITDAR target and its intention to put in place an unsecured
capital structure. Additionally, the action reflects Moody's
expectation that Dollar General's operating performance will continue
to be solid given the strong fundamentals of the dollar store sector.
The review for upgrade will assess Dollar General's intentions to
migrate to an investment grade capital structure with the increased financial
flexibility that would be afforded by a predominantly unsecured debt profile.
This assessment would include the potential refinancing of its senior
secured term loan due 2014.The review for upgrade will also focus
on Dollar General's new store openings, how the continued
expansion into California performs, and Dollar Generals future plans
for its DG Markets format. The review for upgrade will also consider
Dollar General's operating performance expectations, its liquidity,
and its future expectations for share repurchases. Dollar General's
SGL-1 could be impacted as the 2014 term loan maturity approaches,
should it not be refinanced in a timely manner.
The principal methodology used in this rating was the Global Retail Industry
Methodology published in June 2011. Other methodologies used include
Loss Given Default for Speculative-Grade Non-Financial Companies
in the U.S., Canada and EMEA published in June 2009.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
Dollar General Corporation, headquartered in Goodlettsville,
Tennessee, owns and operates over 10,300 extreme value general
merchandise stores in 40 states. Revenues are about $16
billion.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Margaret M Taylor
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Kendra Smith
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's places Dollar General's rating on review for upgrade