Moody's gives B2 to Uvesco, loans

Moody's Investors Service said it gave a B2 corporate family rating and a B2-PD probability of default rating to PAI Castellana Holding 1, SLU (Uvesco). Concurrently, the agency assigned a B2 rating to the €315 million senior secured first-lien term loan B and a B2 rating to the €50 million senior secured revolving credit facility borrowed by PAI Castellana HoldCo 2, SLU, a 100% owned subsidiary of Uvesco. The outlook for both entities is stable.

PAI Partners announced the acquisition of a majority stake in Uvesco. The firm completed the acquisition in the first quarter of 2022.

“The B2 CFR reflects Uvesco's earnings growth on the back of robust like-for-like sale growth rates and store openings; its positive free cash flow generation; its high profitability, with a Moody's-adjusted EBITDA margin of around 11% in 2021; and its focus on locally sourced, high quality fresh products, which differentiates the company from larger competitors.

“Still, the company's rating is constrained by its high leverage, with a Moody's-adjusted (gross) debt/EBITDA of around 6.5x in 2021 and pro forma the transaction; its small size relative to traditional grocers, which could limit its pricing power; the concentration of its earnings in certain regions in the north of Spain; and a low cash balance of only €5 million expected at closing of the transaction,” the agency said in a press release.

The stable outlook reflects expectation that Uvesco's leverage will stay around 6.5x Moody's-adjusted (gross) debt/EBITDA in the next 12 to 18 months, the agency said.

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