S&P assigns Eroski, notes B+

S&P said it preliminarily assigned B+ ratings to Eroski Coop and its planned €500 million in senior secured notes. The company also plans to secure a €113 million amortizing term loan A due 2029. The recovery rating on the notes is 3, indicating meaningful recovery (50%-70%; rounded estimate: 60%) in the event of a payment default. The outlook is stable.

Eroski will use the notes and term loan A to refinance its about €700 million outstanding syndicated loan due 2024. “The difference in debt amounts and transaction costs will be covered with cash on the balance sheet and €35 million proceeds from the disposal of some real estate assets, which the company partially anticipated by entering into an 18-month bridge loan,” S&P said in a press release.

“Eroski is a regional leader in the fragmented and highly competitive Spanish food retail market. With revenue expected to exceed €5 billion in fiscal 2023, Eroski is the fourth-largest food retailer in Spain. According to Kantar, it held a market share of 4.4% in October 2023, behind Mercadona (27.2%), Carrefour (9.7%), and Lidl (6.2%). Despite losing national market share in the past years due to various disposals, it maintains regional leadership,” the agency said.

S&P said it expects Eroski to post 2%-5% annual revenue growth, elevated EBITDA margin of about 10%, and moderately positive free operating cash flow generation will keep its S&P consolidated adjusted leverage at around 4.5x and consolidated EBITDAR coverage at around 2x in fiscals 2023-2025.

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