Moody's Downgrades Supervalu Ratings

NEW YORK — Moody's Investors Service here said Thursday it has downgraded the corporate family rating and probability of default rating of Supervalu [3]’s debt to B3 from B1.

It also said it has downgraded the ratings of Supervalu's senior unsecured debt and its subsidiaries to Caa1 from B2 and assigned a B1 rating to the company's new $850 million senior secured term loan, with a negative outlook.

More Supervalu news: Eyes Potential Sale, Slashes Spending to Cut Prices [4]

"Supervalu continues to lose traffic and market share in an increasingly challenging and competitive industry, as evidenced by its long history of declining identical-store sales," Moody's said. "We expect these negative trends to continue as the company's strategy of lowering prices and simultaneously cutting costs has been unsuccessful in stemming the loss in customer count, and its intention of accelerating price investments will result in further revenue declines and margin pressure."

Moody's said Supervalu's announcements that it is exploring alternatives to enhance shareholder value, including the possible sale of all or part of the company, along with suspending the dividend and lowering capital expenditures to conserve cash and invest in pricing, "[add] further credence to the opinion that management has been unable to improve the company's operating performance using its current strategy, existing store base and capital structure."

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