Moody’s alters DIA view to stable

Moody’s Investors Service said it changed Distribuidora Internacional de Alimentacion’s outlook to stable from negative and affirmed its Caa2 long-term corporate family rating and Ca senior unsecured ratings. The agency also upgraded DIA’s probability of default rating to Caa2-PD from Caa3-PD.

The change in outlook reflects the planned recapitalization agreement expected to conclude by April 2021, which will reduce DIA’s debt burden by €500 million and improve its maturity profile, the agency said.

As part of the recapitalization, the €300 million bond due April 2021 and the €200 million super senior term loan facility will be converted to equity. The €300 million bond due April 2023 will be extended to June 2026. On a Moody’s-adjusted basis, the recapitalization will cut DIA’s debt to €1.82 billion from €2.317 billion as of June 30, 2020, the agency said.

“The stable outlook reflects Moody’s expectation that DIA will continue to improve earnings and cash flows, although the agency expects that free cash flow is likely to be negative in the short-term, and its liquidity is forecast to remain weak. There are still significant execution risks related to the company’s transformation plan,” the agency said in a press release.

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