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Related Issuers
Rating Action:

Moody's upgrades Fresh Market CFR to Caa1

20 Jul 2020

New York, July 20, 2020 -- Moody's Investors Service, ("Moody's") today upgraded the corporate family rating and probability of default rating of The Fresh Market, Inc. to Caa1 and Caa1-PD from Caa2 and Caa2-PD respectively. Moody's also upgraded the rating of the company's senior secured notes to Caa1 from Caa2. The outlook is stable.

"Fresh Market's topline and EBITDA had been improving for the last year and got a further boost from pantry loading due to the coronavirus pandemic as consumers increased transaction sizes while lowering the number of trips to the store", Moody's Vice President Mickey Chadha stated. "Although the recent unprecedented sales growth is expected to moderate in the back half of the year and the industry will remain highly competitive we expect credit metrics will be stronger in the next 12 -18 months than fiscal 2019," Chadha further stated.

Upgrades:

..Issuer: Fresh Market, Inc. (The)

.... Probability of Default Rating, Upgraded to Caa1-PD from Caa2-PD

.... Corporate Family Rating, Upgraded to Caa1 from Caa2

....Senior Secured Regular Bond/Debenture, Upgraded to Caa1 (LGD4) from Caa2 (LGD4)

Outlook Actions:

..Issuer: Fresh Market, Inc. (The)

....Outlook, Remains Stable

RATINGS RATIONALE

The Fresh Market, Inc.'s Caa1 corporate family rating reflects the company's high leverage, relatively small scale, increasing competition, and geographic concentration in the Southeast. Although improving, leverage will still be high with debt/EBITDA in the 6.0 to 6.3 times range with EBIT/interest below 1.0 time (including Moody's standard lease adjustments) in teh next 12 months. Management has undertaken a number of strategic initiatives to improve operating performance including price investments, and the emphasis on higher quality meats and fresh produce and perishables which resulted in improving same store sales and average customer transaction size in fiscal 2019. The pantry loading and panic buying by consumers due to the coronavirus pandemic further improved same store sales by 12.9% in the first quarter of fiscal 2020 ending April 26th, 2020 with the basket size up 25.2%. Profitability and liquidity have improved as promotional cadence has been lower and shrink has improved as inventory turnover has been quicker as demand remains high. Moody's expects same store sales to be strong in the second quarter but start to moderate in the back half of the year and into 2021 as buying patterns start to normalize. In addition to the volatility in financial policies inherent with ownership by a financial sponsor, our ratings also reflect the business environment which will remain highly competitive and as government stimulus programs expire the weak economic environment will result in increasing pricing pressure as promotional activity will accelerate.

Ratings also reflect The Fresh Market's attractive market niche and its above average income demographic. The company's liquidity is good with about $141 million of unrestricted cash and restricted cash of $25.5 million as cash collateral for LC's on the balance sheet at April 26, 2020. Moody's expects the company to remain free cash flow positive for the next 12 months. The company does not have a revolving credit facility but issued $135 million super priority senior secured notes maturing 2025 and proceeds from these notes remain as cash on the balance sheet.

The stable outlook reflects Moody's expectation that credit metrics and profitability will improve in the next 12 months and liquidity will remain good.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Ratings could be upgraded if same store sales growth remains positive accompanied with margin stability. In addition, an upgrade would require maintaining good liquidity. Quantitatively, an upgrade would require debt/EBITDA sustained below 5.5 times and EBIT/interest sustained above 1.0 times with financial policies that support credit metrics at these levels.

Ratings could be downgraded if operating performance does not continue to improve and positive trends in same store sales and operating margins do not continue such that debt/EBITDA is sustained above 7.0 times or EBIT/interest remains below 1 times. Ratings may also be downgraded if debt is not refinanced well in advance of its maturity or if liquidity erodes or financial policies become detrimental to the interest of debt holders.

The Fresh Market, Inc. is a specialty grocery retailer. The Company operates 159 stores in 22 states across the United States. The company is owned by Apollo Global Management, LLC. Revenues for the LTM period ending April 26, 2020 totaled $1.6 billion.

The principal methodology used in these ratings was Retail Industry published in May 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1120379. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Manoj Chadha
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Margaret Taylor
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2023 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 CREDIT RATINGS AFFILIATES ARE THEIR 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 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 APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S 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.

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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 JPY100,000 to approximately JPY550,000,000.

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

​
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