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Global Credit Research - 25 Jan 2011
New York, January 25, 2011 -- Moody's Investors Service downgraded BI-LO, LLC's
("BI-LO") Corporate Family and Probability of Default ratings to
B2 from B1. A B2 rating was assigned to the company's proposed
$285 million senior secured notes due 2019. The rating outlook
The proposed notes are being issued to refinance BI-LO's
existing $195 million senior secured term loan due 2015 and fund
a $74 million cash distribution to the company's equity sponsor.
The $74 million dividend represents about half of the cash equity
investment made by the sponsor in conjunction with BI-LO's
emergence from bankruptcy in April 2010.
$285 million senior secured notes maturing 2019 at B2 (LGD 4,
Corporate Family Rating to B2 from B1
Probability of Default Rating to B2 from B1
Rating affirmed and to be withdrawn once the proposed transaction closes:
$195 million senior secured term loan maturing 2015 at B2
"The downgrade to B2 considers that BI-LO is pursuing a financial
policy that is more aggressive than what was originally expected when
we assigned a rating to the company in April 2010 following its emergence
from bankruptcy," stated Mickey Chadha, Senior Analyst
at Moody's. "The large debt-financed dividend
along with the elimination of the cash flow sweep mechanism suggests there
will not be any meaningful reduction in funded debt through operating
cash flow. As a result, we expect debt/EBITDA will likely
remain over 5 times, a level more consistent with a B2 Corporate
The rating outlook is stable and assumes that regional business conditions
and credit metrics will not deteriorate.
Ratings improvement is not likely in the near-to-intermediate
term given the company's more aggressive financial policy.
Ratings could be upgraded over the longer-term if the company demonstrates
the ability and willingness to achieve and maintain debt to EBITDA at
or below 4.5 times and EBITA to interest at or above 1.5
Ratings could be downgraded if debt to EBITDA rises above 6.0 times
or if EBITA to interest drops and remains below 1.0 time.
Ratings could also be downgraded if the company's cash flow deteriorates
or if operating performance indicates loss of customer traffic.
The last rating action for BI-LO, LLC was the assignment
of the Corporate Family Rating and a rating to the $200 million
(original amount) senior secured term loan due 2015 on April 22,
The principal methodologies used in this rating were Global Retail Industry
published in December 2006, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
BI-LO, LLC owns and operates supermarkets in the Southeastern
U.S. The company has 207 stores under the BI-LO generates
annual revenues of about $2.6 billion BI-LO LLC is
privately held by an affiliate of Lone Star, a private equity investor
headquartered in Dallas, Texas.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's lowers BI-LO's CFR to B2; assigns B2 to new senior secured notes
250 Greenwich Street
New York, NY 10007
No Related Data.
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