Moody's drops Roundy's view to negative

Moody's Investors Service said it changed the outlook of Roundy's Supermarkets, Inc. to negative from stable and affirmed the company's corporate family rating at B2, probability-of-default rating at B3 and its guaranteed first-lien senior secured revolving credit facility and term loan at Ba3 (LGD2, 18%).

The change in outlook follows Roundy's agreement to acquire five Jewel-Osco stores from Supervalu Inc. The purchase will be financed by proceeds from the $57.5 million add-on to the company's existing term loan B, which will result in approximately $800 million to be outstanding under the term loan at closing.

The agency said the negative outlook reflects Roundy's accelerating negative comparable store sales and the challenge of reversing this trend given the extent of competition.

The affirmation of Roundy's B2 corporate family rating recognizes the company's position as the leading supermarket operator in Wisconsin, its relatively modern store base and the improvement achieved in its operating profit margins despite intense and increasing competition from other indigenous supermarket chains and non-traditional grocery retailers, Moody's added.

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