Analysts Comment on A&P’s Financial Condition

Saying “We believe A&P’s capital structure is ultimately unsustainable at current performance levels.” Moody’s investor services has downgraded its speculative grade rating of A&P. This joins Standard and Poor’s rating agency, which also downgraded the company to CCC with a negative outlook.

Marie Menendez, Senior VP at Moody’s released a statement stating, “…Moody’s believes there is a relatively high probability that the company could pursue material change to its capital structure. This could include transactions which Moody’s would view as a distressed exchange and hence a default.”

Standard & Poor’s stated, “…our projection is that the company may be illiquid at some point in the near term as a result of weak performance and its considerable near-term (debt) maturities.”

With fiscal first quarter losses of $122.6M on top of full-year losses of $876M in fiscal 2009, A&P is facing the most daunting financial challenge of its storied history as one of America’s best known supermarket chains. In an effort to quickly implement a turnaround the company has brought in its fourth CEO in less than a year. He is Sam Martin, formerly head of Office Max. Martin is described as a team builder with merchandising and operating skills. Executive Board Chairman, Christian Haub has indicated that A&P’s Board of Directors sought Martin’s skills as it moves into the implementation phase of its turnaround strategy. “We obviously need to get traction on the top line and on margin and on the operations side of the business.”

In a research note, Susan Anderson an analyst at Citigroup wrote, “We believe [Martin] has the skill set to implement the necessary turnaround initiatives at A&P.”