Moody’s rates 7-Eleven notes Baa2

Moody’s Investors Service said it downgraded 7-Eleven, Inc.’s issuer rating to Baa2 from Baa1 and assigned a Baa2 rating to its planned $10.95 billion senior unsecured note issuance. The agency also revised the outlook to stable from under review. These actions conclude the review for downgrade started on Aug. 4, Moody’s said.

Proceeds, a planned $2.25 billion unsecured term loan and $8 billion of equity contributed by 7-Eleven’s parent Seven & i Holdings Co., Ltd. will be used to finance the acquisition of Speedway’s retail locations from Marathon Petroleum Corp. After the deal closes, 7-Eleven plans to do a sale-leaseback transaction of about $5 billion, using the proceeds to reduce debt. Moody’s leverage calculation will include the lease adjustment as debt.

“The downgrade reflects the integration risk associated with the company’s largest acquisition to date and the increase in leverage following the transaction – Moody’s forecasts 7-Eleven’s debt/EBITDA (including Moody’s standard adjustments) will exceed its downgrade factor of 3.75x through 2023,” stated Pete Trombetta, a Moody’s vice president, in a press release.

“The Baa2 rating reflects 7-Eleven’s position as the largest convenience store retailer in North America, its success in deleveraging following previous acquisitions and the strong support from its ultimate parent, Seven & i,” added Trombetta.

The outlook reflects the expectation 7-Eleven will successfully integrate the Speedway acquisition and make steady progress in reducing its leverage and that debt/EBITDA will fall below 4x by 2023, the agency said.

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