Albertsons Cos. Inc.'s Proposed Senior Unsecured Notes Rated 'BB-' (Recovery Rating: '2')

NEW YORK (S&P Global Ratings) Aug. 11, 2020--S&P Global Ratings today said it assigned its 'BB-' issue-level rating and '2' recovery rating to Albertsons Cos. Inc.'s (ACI) proposed new senior unsecured notes. In total, the notes consist of $1.25 billion due in 2026 and 2029. The '2' recovery rating indicates our expectation for substantial recovery to lenders (70%-90%; rounded estimate: 85%). Our issuer credit rating (B+/Stable/--) on the company and all other issue-level ratings are unchanged. Albertsons says it will use the proceeds to refinance the existing 6.625% $1.25 billion senior unsecured notes due 2024. As a result, the refinancing is leverage neutral and extends the company's overall debt maturity profile. We also expect Albertsons to use cash to repay

...ACI notes have. - Our simulated default scenario contemplates that cash flow problems due to 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. - We estimate a gross recovery value of $11.6 billion, taking into consideration the going-concern valuation of the business operations of $4.7 billion and the value of its real estate at $6.9 billion. Our going-concern valuation assumes an emergence EBITDA of $946 million (net of $586 million in assumed additional rent expense if the company did a sale leaseback on its owned real estate). - For the owned real estate properties, we base our valuation on $586 million in estimated rent income (assuming triple net lease contracts), to which we apply an 8.05% capitalization rate. Simulated default assumptions: - Simulated year of default: 2024 - Going-concern valuation: $4.7 billion - EBITDA at emergence: $946 million - EBITDA multiple:...

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