U.S.-based foodservice distributor US Foods Inc. (USF) has entered into an agreement to acquire Smart Foodservice Warehouse Stores for $970 million. We expect USF will fund the transaction with $700 million in new term debt financing and from existing liquidity sources. Assuming the transaction closes, we estimate USF's pro forma adjusted leverage could exceed 5x, compared with the mid-4x area currently. We are placing our 'BB+' issuer credit rating on USF on CreditWatch with negative implications. We are also placing our 'BB+' issue-level ratings on the company's senior secured term loans and 'BB' issue-level rating on its senior unsecured notes on CreditWatch with negative implications. We expect to resolve the CreditWatch after receipt of additional transaction details and further discussions
