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18 Dec 2000
MOODY'S LOWERS RATINGS OF THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. (SENIOR UNSECURED AT Ba3); CONTINUES REVIEW FOR POSSIBLE DOWNGRADE
Approximately $3.1 Billion of Bank Agreements and Debt Securities Affected.
New York, December 18, 2000 -- Moody's Investors Service lowered the ratings of The Great Atlantic
& Pacific Tea Company, Inc. and continued the review
for possible downgrade, based on concerns about the potential impact
of the highly promotional competitive environment on A&P given the
company's already weak debt protection measures. Moody's continuing
review will focus on the company's plans to bolster sales and margins
in the face of intense competition, on its projected capital expenditures
and on the timing of the ultimate benefits from Phase II of Project Great
Ratings lowered and kept on review for possible downgrade:
The Great Atlantic & Pacific Tea Company, Inc.:
Senior unsecured bank credit facility, guaranteed by A&P's
subsidiaries, to Ba2 from Baa3.
Senior unsecured notes to Ba3 from Ba1.
Senior unsecured shelf to (P)Ba3 from (P)Ba1.
Subordinated shelf to (P)B1 from (P)Ba3.
Junior subordinated shelf to (P)B2 from (P)B1.
Preferred stock shelf to (P)"b1" from (P) "ba3".
A&P Finance I, A&P Finance II, A&P Finance III:
Preferred trust securities to (P)"b1" from (P)"ba3".
The Great Atlantic & Pacific Tea Company Limited:
Senior unsecured bank credit facility, guaranteed by A&P and
its subsidiaries, to Ba2 from Baa3.
Senior unsecured notes guaranteed by The Great Atlantic & Pacific
Tea Company, Inc. to Ba3 from Ba1.
Ratings asigned and placed on review for possible downgrade:
Senior implied rating of Ba2
Senior unsecured issuer rating of Ba3
A&P has a solid but somewhat fragmented supermarket franchise with
leading market shares in its major trade areas. For many years,
it has faced fierce competition, including from some stronger supermarket
operators, which has resulted in weak profitability and debt protection
measures. In an effort to turn its operations around, A&P
has embarked on a comprehensive strategy, Project Great Renewal.
Phase I of this restructuring effort focused on its core trade areas and
competencies, while Phase II, launched in March 2000,
is focusing on upgrading the company's supply chain efficiency and
infrastructure. At a time when the company has spent heavily on
Project Great Renewal, competition has further intensified in its
major markets and resulted in weaker than expected cash flow. While
comparable store sales rose 4.4% for fiscal 1999 and 2.2%
for the first 28 weeks of fiscal 2000, net income for the first
28 weeks, proforma to exclude Project Great Renewal charges,
was only about $20.3 million, down from an adjusted
net income of $36.5 million in the same period of the prior
year. Adjusted debt to EBITDAR is high and could rise further as
the company makes necessary capital expenditures. Moody's anticipates
that profitability will remained challenged in A&P's major markets,
as some better capitalized competitors maintain aggressive promotional
activities. The announced elimination of the common dividend,
while positive in terms of debtholder protection, signals an effort
to reduce discretionary expenditures during operationally challenging
Headquartered in Montvale, New Jersey, The Great Atlantic
& Pacific Tea Company, Inc. operates about 750 supermarkets
in 15 states, the District of Columbia and Ontario.
Elaine E. Francolino
VP - Senior Credit Officer
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
No Related Data.
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