The Kroger Co.’s (Kroger) $500 million 6.8% senior notes due 2011 and the $500 million 7.5% senior notes due 2031 are rated ‘BBB’ by Fitch.
Proceeds from the issuance will be used to refinance existing debt. The Rating Outlook is Stable.
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The rating reflects Kroger’s leading position in the food retailing industry, broad geographic reach and solid operating performance. The rating also considers the company’s continued ability to achieve anticipated synergies, the competitive operating environment given the mature nature of the industry and limited food price inflation and Kroger’s appetite for future acquisitions.
The integration of the former Kroger and Fred Meyer operations is resulting in improving operating performance. In the 12 months ended Feb. 3, 2001, earnings before interest, taxes, depreciation, amortization and rents (EBITDAR) as a percent of sales improved to 8.9% from 8.5% in fiscal 1999. During fiscal 2000, Kroger reduced total debt by approximately $450 million despite repurchasing common stock of approximately $500 million. Bondholder protection measures strengthened in the year-ended Feb. 3, 2001, with EBITDAR coverage of interest and rents improving to over 3.1 times (x) versus last years figure of 2.8x. Fitch expects credit measures to improve further over the intermediate term as additional savings materialize and discretionary cash flow is directed to reducing outstanding debt.
Kroger, with revenues of approximately $49 billion, is the largest food retailer in the U.S. operating more than 2,300 supermarkets in 31 states, nearly 800 convenience stores in 15 states and about 400 jewelry stores in 26 states. Its supermarkets hold the number one or two market share position in 33 of its largest markets, with store base concentrations in the Southeast, Midwest, and West.
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