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Moody's places Rite Aid's ratings on review for downgrade over nixed merger

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Moody's places Rite Aid's ratings on review for downgrade over nixed merger

Moody's on Aug. 9 placed the ratings of pharmacy chain Rite Aid Corp. on review for downgrade due to the aborted merger agreement with Albertsons Cos. Inc.

The ratings include Rite Aid's corporate family rating of B2 and probability of default rating of B2-PD. The agency changed the company's outlook to under review from stable.

The review for downgrade reflects Moody's view that the nixed deal leaves Rite Aid in a weaker position as it does not have the scale or balance sheet to effectively compete in the U.S. pharmacy industry against bigger competitors like CVS Health Corp. and Walgreens Boots Alliance Inc.

The termination of the merger also retracts the opportunity for Rite Aid to gain scale and reduce its reliance on purely drug sales which have been under reimbursement pressure, thereby hurting margins.

Moody's said its current view of the company's liquidity is good, supported by ample availability under its $2.7 billion revolving credit facility maturing in 2020.

The agency said its review of the company will consider the management's strategic plan to remain competitive and improve the operating performance of the company, as well as its financial policies.