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Moody’s downgrades Rite Aid
Moody's Investors Service said it downgraded Rite Aid Corp.'s corporate family rating and probability of default rating to B3 and B3-PD from B2 and B2-PD, respectively.
The agency also downgraded the rating of the company's senior secured revolving credit facility to B1 from Ba2, the rating of its senior unsecured guaranteed notes to Caa1 from B3 and the rating of its senior unsecured notes to Caa2 from Caa1.
The company's speculative grade liquidity rating was affirmed at SGL-2.
The outlook is negative.
The actions conclude a review initiated on Aug. 9, prompted by the termination of the merger agreement with Albertsons Inc.
“Despite the debt reduction through the proceeds of the asset sales to Walgreens, the company's leverage remains high due to EBITDA erosion and free cash flow remains weak,” Moody's vice president Mickey Chadha said in a news release.
“Rite-Aid's operating performance has been weak in the last 18-24 months and it has a much weaker competitive position vis-à-vis its much larger and well capitalized competitors in an industry where scale is becoming increasingly important, hence the downgrade.”
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