Moody’s rates Eroski, notes B2

Moody's Investors Service said it assigned a B2 corporate family rating and a B2-PD probability of default rating to Eroski, S. Coop. Concurrently, Moody's assigned a B2 rating to its planned €500 million of backed senior secured fixed-rate notes due 2029. The outlook is stable.

The B2 CFR reflects Eroski's leading market share in its core market in the north of Spain, its track record of relatively stable revenues and EBITDA, its deleveraging track record over the last decade driven by debt write-offs, asset disposals and cash flow generation, its limited shareholder distributions as part of the cooperative structure and its focus on locally sourced products, the agency said.

“However, the company's CFR is weakly positioned at B2 and constrained by the only adequate liquidity with no committed revolving credit facilities, reliance on asset disposals, Moody's expectation that the company will generate negative free cash flows in the next 12 months, although expected to turn positive from 2025, and limited ability to raise equity due to the nature of the cooperative ownership,” Moody’s said in a press release.

The proceeds from the proposed issuance will be used to repay the senior secured syndicated loan due July 2024 and pay transaction fees and related costs.

The outlook reflects an expectation that Eroski's leverage will gradually fall below 4x Moody's-adjusted (gross) debt/EBITDA buoyed by stable EBITDA and limited debt repayments, the agency said.

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