Moody's Lowers Whole Foods' Credit Rating Again

The Wall Street Journal

NOVEMBER 10, 2008, 9:20 A.M. ET

DOW JONES NEWSWIRES

Moody's Investors Service cut its ratings on Whole Foods Market Inc. (WFMI) for the second time in three months as it highlighted the struggles the upscale supermarket chain will likely have in the current environment.

The credit rater pushed Whole Foods down a notch to Ba3, three steps below investment-grade, saying its debt/earnings ratio could increase further as profits are likely to decline near-term. Moody's lowered its rating in August after the company reported weaker-than-expected results.

Whole Foods last week posted a 96% drop in fiscal fourth-quarter net income amid charges, though it said it received a $425 million investment that gives it more breathing room amid tough economic conditions.

Moody's on Monday noted the company's weakening margins and same-store sales, and said the potential for further downgrades reflects "expectations that these conditions will likely continue in the near term, and as a result, Whole Foods' credit metrics could further deteriorate."

Moody's also raised a bit of concern about the $425 million investment by Green Equity Investors V LP, an affiliate of Leonard Green & Partners LP. While it can be converted into a nearly 17% stake in Whole Foods, Moody's noted it could boost leverage levels if some or all of it is treated as debt according to Moody's ratings methodology.

The downgrade follows the one-notch cut Friday by Standard & Poor's, which said the grocer's condition isn't likely to improve in the next year.

Whole Foods shares closed Friday at $10.05 and was flat in recent premarket trading. The stock is down more than 75% so far this year.

-By Shirleen Dorman, Dow Jones Newswires

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