NEW YORK — Moody's Investor Service here said Monday it has assigned a first-time corporate family rating of B2 to 99 Cents Only Stores, with a stable outlook.
It also assigned a B2 rating to the company's proposed $525 million senior secured term loan and Caa1 rating to its proposed $250 million senior unsecured notes. Proceeds from both issues are slated to be used to finance the $1.6 billion acquisition of the company by affiliates of Area Management, Los Angeles, a global alternative asset manager and investment adviser, and the Canada Pension Plan Investment Board, a Toronto-based investment management organization that invests funds not needed by the Canada Pension Plan.
Moody's said the rating reflects the high leverage the company will have after its leveraged buyout and also considers that approximately 74% of its stores are located in California, where competitive pressures are expected to intensify as Dollar General and Family Dollar enter the marketplace.
According to Moody's, the rating is also supported by 99 Cent Only's good liquidity and its unique merchandising strategy, "which somewhat mitigates it from competitive pressures and has resulted in store productivity outpacing its peer group."