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Moody's Rates Smart & Final Buyer

NEW YORK — Moody's Investors Service here said Tuesday it has assigned a B3 corporate family rating and probability of default rating to SF CC Intermediate Holdings, a holding company formed by Ares Management to acquire Smart & Final Stores, Los Angeles.

According to Moody's, the corporate family rating reflects the company's weak pro forma credit metrics, regional concentration and challenging geographic and demographic markets, while also recognizing its adequate liquidity, consistent positive same-store sales growth, the potential benefits of its diversification efforts and new management initiatives.

"Although Smart & Final's operating performance continues to demonstrate its ability to compete effectively and maintain margins in a tough economic and competitive business environment, this transaction will significantly weaken the company's credit metrics while more than doubling its existing funded debt burden," Moody's said.

Smart & Final operates 235 non-membership warehouse stores in six Western states and northern Mexico.

Read more: Apollo to Sell Smart & Final to Ares

Moody's said it has also assigned a Ba2 rating to the company's proposed $150 million asset-based lending (ABL) revolving credit facility; a B3 rating to its proposed $510 million first lien term loan; and a Caa2 rating to its proposed $210 million second lien term loan, with a stable ratings outlook. All existing ratings for Smart & Final Holdings Corp. and Smart & Final Stores LLC have been put on review for downgrade and will be withdrawn at the close of the proposed transaction, Moody's said.

Proceeds from the proposed financing, along with approximately $287 million in equity from Ares, will be used to acquire Smart & Final Stores LLC and repay existing debt. When the transaction closes, the ABL revolver and first and second lien term loans will be contributed and assigned to Smart & Final Stores or its direct parent, Moody's noted.

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