Moody’s Notes Impact of Pension Obligations

NEW YORK — Estimated multi-employer pension-plan funding shortfalls will weaken the financial leverage metrics of U.S. supermarkets, but most companies’ debt ratings will not be affected, Moody’s said Tuesday.

"Supermarkets will need to redirect an increasingly large share of cash flow toward funding their multi-employer pension plans, although we do not expect any sudden or near-term increase in pension-funding contributions," said Mickey Chadha, vice president and senior analyst, Moody’s.

Moody’s pointed to Safeway [3] as having the least amount of cushion in its ratings as its credit metrics deteriorated following debt-financed share repurchases. Kroger Co. [4], Supervalu [5] and Stater Bros. Holdings [6]will see “modest increases in leverage” from Moody's upward revision to pension shortfalls. Moody's updated in April its underfunding multiples for rated U.S. companies that it identified as participating in multi-employer pension plans.