NEW YORK — Moody's Investors Service here said Friday it has assigned a B3 rating to the $200 million second-lien notes proposed by Roundy's Supermarkets, Milwaukee.


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The lien will be utilized to repay approximately $150 million of the chain's term loan, with remaining proceeds being used to acquire 11 Dominick's locations in the Chicago market area — a deal in which Roundy's said it will pay $36 million in cash to Pleasanton, Calif.-based Safeway, which owns the Dominick's stores. Moody's said it believes the Dominick's acquisition makes strategic sense, though it will be integrating the Chicago stores "while at the same time experiencing challenges in its core business, which increases the overall risk profile for the company in the intermediate term."

Moody's also affirmed Roundy's B2 corporate family rating and existing instrument ratings and upgraded the chain's probability of default rating to B2-PD from B3-PD, with a negative outlook. It said the upgrade reflects the implementation of a more complex capital structure with the introduction of second-lien debt, which the negative outlook reflects uncertainty regarding the company's ability to improve credit metrics, “given the challenging operating environment facing its legacy businesses and the incremental debt resulting from the Dominick's acquisition.”

Read more: Roundy's to Acquire 11 Dominick's

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