Albertsons Cos. Inc. Senior Unsecured Guaranteed Notes Rated 'BB', Recovery Rating '3'

DALLAS (S&P Global Ratings) Feb. 6, 2023--S&P Global Ratings today said it assigned its 'BB' issue-level rating and '3' recovery rating to Albertsons Cos. Inc.'s (ACI) proposed $750 million senior unsecured notes due 2028. The '3' recovery rating indicates our expectation for meaningful recovery to lenders (50%-70%; rounded estimate: 65%). Our issuer credit rating (BB/Watch Pos/--) on the company and all other issue-level ratings are unchanged. Albertsons says it will use the proceeds to refinance its existing 3.5% $750 million senior unsecured notes due 2023 and we therefore view the refinancing as leverage neutral. Albertsons' earnings for the third quarter ended December 3, 2022 included 7.9% identical sales and a 70 basis point contraction in gross margin. The contraction was

...percentage band falls at 5%. - Our simulated default scenario contemplates that cash flow problems from an economic downturn, combined with new competitors stepping up their entry into the company's markets, lead to a significant decline in ACI's revenue and profitability. Simulated default assumptions: - Simulated year of default: 2028 - EBITDA at emergence: $1 billion - EBITDA multiple: 5.0x Real estate valuation: - Implied rent income: $586 million - Capitalization rate: 8.05% Simplified waterfall: - Net enterprise value (after administrative costs): $11.4 billion - Less: Priority Claims (ABL revolver outstanding and mortgage debt): $2.2 billion - Less: Preferred Shares: $1.75 billion - Net available to ACI unsecured notes: $7.4 billion - --Recovery expectations: Capped at 50%-70%; rounded estimate: 65% (capped at '3' recovery rating) - No net residual value available to Safeway and NALP unsecured senior notes - --Recovery expectations (Safeway and NALP notes): 0%-10%; ('6' recovery...

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