Moody’s Investors Service on Monday said it upgraded its outlook for the debt of A&P, citing some gains the chain has made, as well as cash generated through asset sales.
"Although we still think that A&P's capital structure is unsustainable, it's operating performance and liquidity have demonstrated some improvement as management initiatives have had a positive impact on profitability, cash flow and traffic", said Moody's senior analyst Mickey Chadha. "However, same-store sales growth continues to underperform, and reversing the company's brand erosion due to an extended period of underperformance will continue to be challenging in light of stiff competition and a sluggish economy.”
Moody’s changed the outlook for the Montvale, N.J.-based company’s debt to “stable” from “negative” and affirmed its Caa2 corporate family rating. About $235 million in debt was affected.
The relatively low rating on the debt reflects the company’s “weak operating performance, very weak credit metrics” and Moody’s opinion that A&P's cash interest coverage and free cash flow will remain weak over the next year.
For fiscal 2014, Moody’s said it expects A&P’s debt/EBITDA ratio to be about 8.5 times, and its and EBITA/interest ratio to be less than one times. Moody’s said A&P’s cash balance has been enhanced through improved cash flow as well from the asset sales and sale-leaseback transactions it conducted last year.
Privately owned A&P, parent of the A&P, Food Vasics, Pathmark, Waldbaum's, Food Emporium and SuperFresh banners, operates about 301 stores in the Northeast.
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