Moody's Confirms Sprouts Bond Ratings

NEW YORK — Moody's Investors Service here said it was confirming the bond ratings, with a stable outlook, for Sprouts Farmers Markets, Phoenix, as it prepares to merge with Sunflower Farmers Markets, Boulder, Colo.

"The acquisition will result in the combination of two very similar grocery store concepts with very little geographical overlap and will therefore have relatively low integration costs and minimal disruption in customer base," Moody's said. "We expect the acquisition to be leverage-neutral as the transaction is being financed with a combination of debt and equity."

Moody's confirmed the company's B2 corporate family and probability of default ratings and the B2 rating on its existing $310 million senior secured term loan and $50 million senior secured revolving credit facility. Moody's also said it was assigning a B2 rating to Sprouts' proposed $100 million add-on senior secured term loan.

"Sprouts' B2 corporate family rating reflects its high leverage, relatively small scale, aggressive growth strategy, increased amount of funded debt and financial policy risk, as well as its attractive market niche and good operating performance in a challenging economic and competitive environment and good liquidity," Moody's noted.

The stable outlook incorporates Moody's expectation that same-store sales growth will remain positive and that the integration of Sunflower will not result in deterioration of liquidity or margins.