Moodys.com
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

 

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

Terms of One-Time Website Use

 

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

 

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

 

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

 

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

MOODY'S ASSIGNS Ba2 TO PROPOSED BANK LOAN OF FLEMING COMPANIES, Ba3 TO PROPOSED SENIOR NOTES, AND CONFIRMS ALL OTHER RATINGS

10 Jun 2002
MOODY'S ASSIGNS Ba2 TO PROPOSED BANK LOAN OF FLEMING COMPANIES, Ba3 TO PROPOSED SENIOR NOTES, AND CONFIRMS ALL OTHER RATINGS

Approximately $3.0 Billion of Debt Affected.

New York, June 10, 2002 -- Moody's Investors Service rated the following proposed new issues of Fleming Companies, Inc. (subject to review of final documentation):

$950 million "New" secured credit facility assigned at Ba2, and

$200 million 8-year senior notes assigned at Ba3.

Moody's also confirmed other ratings as follows:

$699 million "Old" secured credit facility at Ba2,

$355 million 10 1/8% senior notes (2008) at Ba3,

$400 million 10 5/8% senior subordinated notes (2007) at B2,

$150 million 5 ¼% convertible senior subordinated notes (2009) at B2,

$260 million 9 7/8% senior subordinated notes (2012) at B2,

Senior implied rating at Ba3, and the

Long-term issuer rating at B1.

Proceeds from the new debt, together with $200 million in new equity, will be used to refinance the Old credit facility and to fund the $390 million acquisition of the convenience store distributor Core-Mark. The rating on the Old credit facility will be withdrawn once it has been repaid. The rating outlook is revised to negative from stable.

The ratings reflect the company's leveraged financial condition and that, while equity will increase by $200 million as a result of the transaction, funded debt will also increase by about $230 million with the potential for additional borrowings from the revolving credit facility. Restraining the ratings are the uncertainty related to resolution of the Kmart bankruptcy and the large post-filing losses reported by Kmart, Fleming's largest customer with 20% of sales during 2001 (declines to pro-forma 16% after the acquisition). Directly, or indirectly through its customers, the company competes with respected retailers such as Wal-Mart (senior unsecured rating of Aa2), Target (senior unsecured rating of A2), and the national supermarket chains. The intense competition within the fragmented distribution industry, the challenges in effectively integrating anticipated future distribution acquisitions, and the necessity to replace clients lost in the consolidating supermarket industry also impact Moody's views of the risks facing Fleming.

However, the ratings recognize Fleming's status as the nation's largest food distributor, the economies of scale that the company can bring relative to its smaller competitors, and the company's position as the only national grocery distributor. The new position as the only national convenience store distributor alternative to McLane (a unit of Wal-Mart) could prove appealing to potential customers. The ratings also consider the company's efforts to diversify its wholesale customer base (such as the recent supply agreement with Albertson's) and ongoing operating improvements in the company's wholesale and retail segments.

The negative outlook considers our belief that the ratings will be constrained until the status of Kmart becomes clearer and Fleming proves that the acquisition strategy provides acceptable returns. We do not believe that significant leverage and fixed charge coverage improvements can reliably be expected over the intermediate term. Factors that could lead Moody's to consider a negative rating action include materially adverse affects from the Kmart situation, inability to replace the normal attrition of wholesale customers, or failure to effectively integrate the new acquisitions. Reversal of recent modest improvements in interest coverage, return on assets, and operating margin also would cause concerns regarding the current rating levels, particularly given that similarly rated food distributors have better debt protection measures. For Moody's to consider a positive rating action, the company would need to successfully diversify its wholesale revenue base (including profitably integrating the new acquisitions), to successfully continue the retail strategy of expanding price-impact supermarket store count, and to make material improvements in debt protection measures.

The Ba2 rating on the New bank loan recognizes the seniority of this debt relative to other parts of the capital structure. The New bank loan will be comprised of a $600 million revolving credit facility and a $350 million term loan. The accounts receivable and inventory of the company and its subsidiaries, as well as the equity shares and guarantees of all domestic operating subsidiaries, secure this loan. Relative to the Old bank loan, the New bank loan is expected to have a meaningfully tighter asset coverage covenant. The bank loan will have covenants that place limitations on borrowing to fund acquisitions. As of April 2002, about $240 million of the Old $600 million revolving bank facility (matures July 2003) was available.

The Ba3 rating on the two issues of senior unsecured notes reflects, besides the guarantees provided by subsidiaries, their effective subordination to the secured bank loan. Moody's expects that the new bond indenture will be similar to the 2008 indenture. The notching at the senior implied rating recognizes that there are effectively restrictions on incurring more secured debt unless the company performs well.

The B2 rating on the three issues of senior subordinated notes considers that the notes are guaranteed by the operating subsidiaries but are contractually subordinate to substantial amounts of senior debt. Besides these rated issues, the company called a $250 million 10 ½% senior subordinated note issue at 102.63% of par on June 1, 2002 using cash held in escrow. The 2012 indenture establishes a fixed charge coverage ratio test of 2.25 to 1 for the incurrance of additional debt.

Adjusted debt (equals balance sheet debt plus 8 times gross rent expense) to EBITDAR of 5.7 times (based on reported results without adjustments) and fixed charge coverage of 1.5 times for the twelve months ending April 20, 2002 were relatively high compared to similarly rated grocery distribution companies. Operating margin of 1.6% over the last 12 months has improved compared to previous periods as the company improves distribution efficiencies and focuses on a value-priced supermarket retailing strategy. Gross margins have consistently fallen year over year, as low-margin wholesale revenue becomes a larger part of the revenue mix compared to retail revenue. Tangible equity will decline as a result of this transaction as the Core-Mark acquisition contributes about $260 million of goodwill, versus almost $200 million of new equity.

Kmart is Fleming's most important customer with 23% of sales during the first quarter of 2002. Kmart received bankruptcy court approval to initially close 283 stores (about 13% of Kmart's store count). Moody's expects that cash flow generation will only be modestly impacted from the closure of these generally low-volume stores as, pro-forma for the Core-Mark acquisition and the store closures, Kmart declines to about 16% of sales. While Moody's believes that Kmart does not have a better substitute for Fleming's national grocery distribution capabilities, the poor operating performance at Kmart with losses of $269 million, $175 million, and $1.0 billion in February, March, and April, respectively, and large comparable store sales declines since the January 2002 bankruptcy filing raise substantial concerns about Kmart's prospects, in spite of its $1.8 billion cash balance. The possibility that more Kmart stores could be closed or that Kmart strategy could change during the bankruptcy process represents a setback for Fleming's business plan.

The acquisitions of two convenience store distributors, Core-Mark in the West and Head in the Southeast, complement Fleming's existing convenience store distribution system in the Northeast and virtually completes the only nationwide piece-pick distribution network besides McLane. In contrast with most other major grocery wholesalers that have expanded to derive a significant fraction of their revenue from supermarket operations, Fleming's retail segment has fallen to 13% of revenue. Previously we had expected that revenue growth would largely occur as the result of organic customer wins, but Moody's now understands that the company intends to devote a sizable proportion of future investment capital to acquiring traditional grocery and piece-pick distributors. In Moody's view, the plan to undertake a significant acquisition program has potential long-term benefits in terms of revenue and cash flow, compared to the strategy of organic growth, but shorter-term risks.

Fleming Companies, Inc., with principal executive offices in Lewisville, Texas, is a leading food distribution company serving approximately 3000 supermarkets (including 116 company-owned grocery stores), 6800 convenience stores, and 2000 other retail locations. With the acquisition of Core-Mark International, Inc of South San Francisco, California and Head Distributing Inc. of Smyrna, Georgia, the company will add about 33000 additional convenience store customers.

New York
Robert N. McCreary
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Richard Baldwin
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR  PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​
Moodys.com