S&P rates Albertson's HITS BBB

Standard & Poor's said it assigned its BBB rating to Albertson's Inc.'s $1 billion of hybrid income security units (HITS).

The rating applies to the company's obligation to service the debt component, as well as its obligation to issue shares under the forward contract. The rating does not pertain to safety of principal. The units' value depends on the market value of the company's common shares, and is not addressed by the credit rating.

Proceeds will be used to finance a portion of Albertson's $2.5 billion acquisition of Shaw's supermarket chain. If the offering is not completed prior to the closing of the acquisition, the company intends to use a combination of cash and commercial paper, subsequently using proceeds from the HITS offering to repay commercial paper.

On March 26, S&P said it affirmed its ratings on Albertson's (BBB/stable/A-2) following the company's announcement that it plans to acquire JS USA Holdings Inc., which operates the Shaw's and Star Markets supermarket banners, from U.K. supermarket operator J. Sainsbury plc.

The acquisition provides Albertson's with modest additional geographic diversification but adds a solid 202-store operator with strengths in loyalty cards, neighborhood marketing, and promotional strategy. Shaw's, with $4.6 billion in 2003 annual revenues, holds the first or second market position in all six New England states. Overall, S&P believes the acquisition does not change Albertson's above-average business profile.

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