NEW YORK — Moody's Investor Service here said Tuesday it is upgrading the long-term ratings of Dollar General Corp., Goodlettsville, Tenn., reflecting its continued strong operating performance and modest debt repayments from free cash flow.
Moody's said the upgrade also reflects its opinion that Dollar General's continued voluntary debt repayments, strong cash-flow generation and solid credit metrics provide ample flexibility to maintain a solid financial profile.
The upgrade includes the company's corporate family and probability of default rating to Ba3 from B1 and an affirmation of its SGL-1 speculative grade liquidity rating.
Moody's said the rating also considers its expectation the company will continue to perform solidly through the sluggish economic environment and that its credit metrics will continue to modestly improve, absent a material debt-financed transaction.
However, given financial sponsor Kohlberg Kravis Robert's controlling interest in Dollar General, its medium- to longer-term financial policy and targeted capital structure is currently unclear, Moody's said. "As a result, there is a reasonable possibility Dollar General will consider re-leveraging at some point, which is a rating constraint."
