Shoppers On Review, Waste Management Moves To I-Grade

Shoppers Drug Mart Corp.'s improved operating and financial performance may boost the Toronto-based company's loan rating up from Ba1. Shoppers' progress in strategic initiatives, such as promoting pharmacy expertise, accelerating store growth, emphasis on a larger store size and refining of merchandise mix are all factors that prompted Moody's Investors Service to place the company's bank debt under review for possible upgrade, affecting Shoppers' $949 million in credit facilities. The possible upgrade will depend on the retail drug company's acquisitions, capital expenditure program, and the re-launching of its private label offerings. The review will also examine Shoppers' ability to contend with growing competition from other drug stores, as well as the company's systems and logistics initiatives. John Caplice, cfo at Shoppers, declined to comment.

* Waste Management has maintained strong cash flow despite a sluggish economy, bumping the company's senior debt up into investment-grade territory. Its $1.75 billion, senior unsecured revolving credit was notched up by Moody's to Baa3 from Ba1. Moody's has assigned a stable outlook to the credit, with the belief that further weakness in the economy would not be sufficient to negatively affect the rating.

The upgrade reflects Houston-based Waste Management's ability to generate cash in a market challenged by higher fuel and insurance costs. The ratings were also influenced by improvement in Waste Management's liquidity profile--thanks to the relaxing of a leverage covenant--and its prudent treasury policy. According to Moody's, the company generated over $2.1 billion of cash flow from operations last year, which was used to finance about $1.3 billion of capital expenditures and $982 million in share repurchases. Moody's believes that the company's cash flow could further increase as it continues with its cost savings program and improves working capital management. Ron Jones, Waste Management's treasurer, did not return calls.