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Moody's Affirms Smart & Final Ratings

NEW YORK — Moody's Investors Service here said Friday it has affirmed the ratings of SF CC Intermediate Holdings, the corporate parent of Smart & Final, Los Angeles, with a stable outlook.

Moody's affirmed the company's B3 corporate family ratings; B3-PD probability of default ratings; the B3 ratings of the company's first-lien term loan, which is expected to increase by $140 million; the Ba2 rating of its $150 million asset-based lending [ABL] revolving credit facility; and the B3 rating of its existing $575-million first-lien term loan. Proceeds from the proposed incremental first-lien term loan will be used to refinance the company's existing second-lien term loan, Moody's noted.


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"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, the company's credit metrics remain weak," Moody's said. "While the rating of the first-lien term loan is affirmed at B3, the expected loss-given default [LGD] rate for the term loan in a default scenario has significantly increased, reflecting the elimination of the cushion afforded by the second-lien term loan in the capital structure."

Read more: Kaplan Named Chairman of Smart & Final

Moody's said the stable outlook reflects its expectation that credit metrics will improve moderately over the next 12 to 18 months, driven by the improving economy and by management initiatives focused on price optimization, cost savings and product offerings.

Smart & Final, Commerce, Calif., operates 188 non-membership warehouse club stores and 52 Cash & Carry stores in six Western states, plus 13 joint-venture stores in Mexico.

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