The ratings cut stems from the disclosure that restatement of profits at Ahold's Columbia, MD, based U.S. Foodservice (USF) subsidiary will amount to a larger-than- expected total of $880 million, as compared to $500 million in original estimates. (See ID web news earlier today.)
S&P also cut Ahold's senior unsecured debt ratings to B+ from BB+ and affirmed its B short-term rating on the group.
These actions reflect Ahold's "tight liquidity" which will remain, "barring major divestments," according to an S&P credit analyst. S&P sees "limited leeway" for Ahold under current credit facilities and feels there is uncertainty regarding its ability to access a $915-million unsecured line of credit. Failure to access the unsecured tranche could put ratings in jeopardy, given Ahold's debt repayments in the second half of the year.
Ahold is due to repay a 678-million euro subordinated convertible bond in September 2003. This will constrain liquidity even if the Netherlands-based grocery and food distribution company obtains access to the unsecured credit line.