Fitch might lift Supervalu

Fitch Ratings said it placed Supervalu Inc.'s ratings on positive watch following the announcement of its proposed acquisition by United Natural Foods, Inc.

The agency said the combined entity's position as leading wholesale grocery distributor with positive free cash flow and projected adjusted leverage in the mid to high 4 times range three years post-acquisition close would be representative of a stronger credit rating profile than Supervalu's stand-alone B issuer default rating.

“SVU's ratings weigh its position as one of the largest wholesale distributors in the U.S. against its mediocre retail grocery market positions,” Fitch said in a news release.

“Ratings are constrained by heightened competition, consolidation and restructurings in the supermarket industry as well as SVU's declining retail operating earnings and the expected loss of EBITDA from the winddown of its transition service agreement (TSA) with Albertsons.”

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