S&P Assigns ‘B-’ rating to A&P

MONTVALE, N.J. — A&P [2] should be able to maintain adequate liquidity and improve its performance in the coming years, but will still lag competitors’ operating metrics and be vulnerable to sales declines and a slow economy, according to Standard & Poor’s, which assigned the reorganized company a B- corporate credit rating and a negative outlook this week.

S&P said actions taken during A&P’s 15-month stay in federal bankruptcy court, which ended earlier this month, will benefit the retailer by improving its cost structure, while initiatives to improve in-store performance could arrest sales declines and lead to flat sales in 2012. S&P is projecting sales to improve by 2% to 3% in 2013 as a result of higher comparable-store sales. It projected EBITDA of $120 million in 2012 and $180 million in 2013, and EBITDA margins of just under 2% in 2012 and 2.5% in 2013.

“We believe that the total effect and timing of the company’s various initiatives will likely be uneven and somewhat difficult to predict,” S&P added. “As such we believe that there is a wide range of possible performance scenarios and credit ratios over the next two years. Nonetheless, even in our most optimistic expected performance scenarios, we would expect the company’s credit ratios to remain in line with indicative ratios of highly leveraged financial risk profiles.

"Conversely, in our anticipated downside scenarios, we still expect the company to have the liquidity resources to fund administrative costs and the capital spending associated with its initiatives over the next two years.”