Moody's rates Roundy's loan Caa1

Moody's Investors Service said it assigned a Caa1 (LGD5, 79%) rating to Roundy's Supermarkets, Inc.'s new $150 million second-lien term loan due 2016, upgraded the probability-of-default rating to B2 from B3 and affirmed its corporate family rating at B2 and its senior secured revolving credit facility due 2012 and senior secured term loan B due 2013 at B1 with a revised loss-given-default assessment of LGD3, 39% (formerly LGD2, 27%).

The outlook was changed to negative from stable.

The new loan will be used to finance a $150 million dividend.

The agency said the ratings reflect the expectation that Roundy's credit metrics, which will be stressed immediately following the dividend transaction, will return to more comfortable levels for the B2 corporate family rating within a reasonable period as a result of using cash flow for debt reduction.

The negative outlook reflects a heightened risk of a downgrade due to Roundy's reduced financial flexibility following the increase of $150 million in long-term debt during a time of unstable industry conditions, Moody's said.

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