Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, March 4, 1993 TAG: 9303040055
SECTION: BUSINESS PAGE: B7 EDITION: METRO
SOURCE: Associated Press
DATELINE: CHARLOTTE LENGTH: Medium
FOOD LION'S CREDIT REVIEW NO SURPRISE
Standard & Poor's decision to review up to $500 million of the credit of Food Lion Stores Inc. to see if it should be downgraded did not surprise the company, a spokesman says."Some people who see this may not understand how difficult it is to maintain a single-A rating," Food Lion spokesman Mike Mozingo said after the bond rating company issued its report this week.
A downgrading could mean the Salisbury, N.C.-based chain would have to pay higher interest on its debt, analysts said.
The S&P report said it was placing Food Lion's single-A $150 million medium-term notes program under review, as well as a preliminary single-A $350 million senior debt securities program and Food Lion's A-1 commercial paper.
S&P said it was concerned about the amount of time it may take the company to rebound from recent declines in its sales and earnings. Stock value slipped from about $10 to below $7 after a November television show that alleged the company sold spoiled food. The company is suing ABC-TV, which aired the show.
Janis Richards of S&P said the bond-rating house will meet with Food Lion management before deciding whether to lower the rating.
Food Lion's 1992 profits were down more than 13 percent, to $178 million, or 37 cents a share. Fourth-quarter earnings were down 55 percent from a year earlier.
Last week, Food Lion founder Ralph Ketner sold 500,000 shares of Food Lion Class A stock and a similar amount of Class B stock. In addition, Ketner's wife, Anne, sold 200,000 shares of Class A stock and 200,000 shares of Class B stock. The 1.4 million shares amounted to 14 percent of the couple's stake in the chain.
Ketner, who retired April 1, 1991, said he and his wife sold the stock to diversify investments and "for other financial planning reasons." Ketner, 72, remains on the Food Lion board.
Ketner's stock sale came after Tom E. Smith, Food Lion's president and chief executive officer, and Vincent G. Watkins, vice president, also sold stock.
David Presson, a supermarket-industry analyst with Edward D. Jones in St. Louis, saw no connection between the stock sales and S&P's announcement.
"Yes, a certain amount of insider selling went on, but it was such a small amount that it would have had no impact," he said.
Presson said Food Lion has been hurt more in new markets where it is expanding, including Texas, Oklahoma and Louisiana, than in its existing markets.
Food Lion employs about 60,000 people in nearly 1,000 stores in 14 states.
"In the newer markets, the only exposure has come from the TV show," Presson said. "It was already a tough battle for them to win in Texas to begin with. The negative exposure makes it lot a tougher for them."
Staff writer Sandra Brown Kelly contributed to this story.