Moody's Lowers Bi-Lo's Debt Rating

NEW YORK — Moody's Investors Service here said Friday it was confirming the ratings for Bi-Lo's corporate family and probability of default bonds at B2 but was lowering the ratings on the company's $285 million senior secured notes due in 2019 to B3 from B2.

Moody's said the ratings actions conclude the review it initiated in mid-December following the announcement by Bi-Lo, Mauldin, S.C., that it had signed a definitive agreement to acquire all outstanding shares of Winn-Dixie Stores, Jacksonville, Fla.

Moody's said the downgrade of the debt securities reflects the incremental borrowings expected under the proposed $700 million asset-based-lending revolving credit facility. However, it said the overall ratings outlook is stable based on the expectation "that margins and same-store sales for Winn-Dixie's store base will improve as its operations are integrated into Bi-Lo, resulting in improved profitability and credit metrics for the combined company in the near- to medium-term.

"Although Winn-Dixie is over twice the size of Bi-Lo, resulting in significant execution and integration risk, the acquisition will result in improved scale and geographic footprint for Bi-Lo as it has very little geographic overlap with Winn-Dixie's store base.

"We expect the acquisition to be leverage-neutral as a majority of the total funding for the transaction is being financed with cash balances and equity contributed by Lone Star, [the investment group that owns Bi-Lo]," Moody's said.