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RESEARCH
CREDIT RATING REPORTSemi-Annual Update | October 2017
CALKAIN12930 Worldgate Drive | Suite 150
Herndon, VA 20170 (703) 787-4714
CALKAIN.COM
CREDIT RATING REPORT OCTOBER 2017
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RESEARCH
R E S E A R C H @ C A L K A I N . C O M C A L K A I N . C O M2
Rated TenantsTENANT NAME STOCK
SYMBOL1 S&P 2 S&P OUTLOOK MOODY'S MOODY'S
OUTLOOK
C-STORES7-Eleven SE AA- Negative Baa1 Stable
Circle K / Kangaroo ANCUF BBB Stable Baa2 Stable
Shell Oil SHOI A+ Positive Aa3 Stable
Pilot Flying J N/A BB+ Stable Ba1 Stable
AUTOMOTIVEAdvance Auto Parts AAP BBB- Stable Baa2 Stable
AutoZone AZO BBB Stable Baa1 Stable
O'Reilly Auto Parts ORLY BBB+ Stable Baa1 Stable
Pep Boys IEP BB+ Stable Ba3 Stable
CASUAL DININGCarrabba's BLMN BB Stable NR NR
Chili's EAT BB+ Stable Ba1 Stable
Darden Restaurants DRI BBB Stable Baa3 Under Review (Possible Upgrade)
Red Lobster N/A NR NR B3 Stable
P.F. Chang's / Pei Wei N/A B- Negative B3 Stable
QSRBurger King QSR B+ Stable NR NR
Dairy Queen BRK.A AA Stable Aa2 Stable
Hardee's N/A B- Stable NR NR
McDonald's MCD BBB+ Stable Baa1 Stable
Starbucks SBUX A Stable A2 Stable
Taco Bell / KFC YUM BB Stable Ba3 Stable
Wendy's WEN B Stable B2 Stable
BANKS
Bank of America BAC A+ Stable A1 Under Review (Possible Upgrade)
BankUnited BKU NR NR Ba1 Stable
BB&T Bank BBT A- Stable A2 Stable
BMO Harris Bank BMO A+ Stable Baa1 Stable
Chase Bank JPM A+ Stable Aa3 Stable
PNC Bank PNC A Stable A2 Stable
SunTrust STI BBB+ Positive Baa1 Stable
TD Bank TD AA- Stable A2 Stable
TENANT NAME STOCK SYMBOL1 S&P 2 S&P
OUTLOOK MOODY'S MOODY'S OUTLOOK
BIG BOXBest Buy BBY BBB- Positive Baa1 Stable
Costco COST A+ Stable A1 Positive
Kohl's KSS BBB- Negative Baa2 Stable
Lowe's LOW A- Stable A3 Stable
Walmart WMT AA Stable Aa2 Stable
Petco N/A B Negative B2 Stable
PHARMACIESCVS CVS BBB+ Stable Baa1 StableRite Aid RAD B Positive B2 StableWalgreens WBA BBB Stable Baa2 StableMEDICAL
Affordable Care N/A B- Stable B3 Stable
DaVita Dialysis DVA BB Stable Ba2 Stable
Fresenius Medical Care FME BBB- Stable Baa3 Stable
DOLLAR STORESDollar General DG BBB Stable Baa2 Stable
Dollar Tree / Family Dollar DLTR BB+ Positive Ba1 Under Review (Possible Upgrade)
GROCERY
Delhaize DEG NR NR Baa2 Under Review (Possible Upgrade)
Kroger KR BBB Stable Baa1 StableWegmans N/A BBB+ Stable NR NRWhole Foods WFMI A+ Stable Baa1 StableGENERAL
Builders FirstSource BLDR B+ Positive B2 Stable
Burlington BURL BB Stable NR NR
FedEx FDX BBB Stable Baa2 Stable
Sherwin-Williams SHW BBB Stable Baa3 Stable
Verizon VZ BBB+ Stable Baa1 Stable
1 N/A = Private company 2 According to S&P credit conditions: policy uncertainty and rising rates pose risks in
North America, but faster growth may help
*NR = Not rated by the rating agency
KEY: Rating decrease since last report | Rating increase since last report
As of 10/10/2017
CREDIT RATING REPORT OCTOBER 2017
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RESEARCH
R E S E A R C H @ C A L K A I N . C O M C A L K A I N . C O M3
Unrated Tenants - ListedTENANT STOCK
SYMBOLSTORE COUNT FOUNDED
NET INCOME
(MILLIONS)
MARKET CAP
(BILLIONS)NOTES
Aaron's AAN 1,864 1955 $139.28 $3.11 Aaron's is looking to accelerate their omnichannel platform to increase the ways they engage customers.
Applebee's / IHOP (owned by DineEquity) DIN 3,749 2008 $96.61 $0.80 DineEquity has sold nearly all of its company-owned restaurants to
franchisees as a way to generate more consistent revenue.
BankUnited BKU 100 1984 $216.98 $3.73
BankUnited Small Business Finance announced it has expanded into Washington, Ohio and Wisconsin, while also deepening their footprint in Florida. Ranked on Forbes Magazine's list as one of the "Best Banks in America 2016".
Bojangles' BOJA 716 1977 $37.72 $0.49 Bojangles’ plans to grow their number of locations by 7% - 8% annually.
Chipotle CMG 2,250 1993 $22.94 $8.67 Chipotle expects to open between 195 and 210 additional restaurants in 2017.
Cracker Barrel CBRL 645 1969 $201.90 $3.66 Cracker Barrel has opened 6 stores in 2017 and plans to open 8 or 9 in 2018.
Dunkin' Donuts DNKN 11,366 1950 $195.58 $4.96 723 new restaurants were added worldwide, including 397 Dunkin' Donuts in the U.S. in 2016.
Fred's Pharmacy FRED 601 1947 $66.53 $0.22
Fred’s initially agreed to purchase 865 divested Rite Aid stores once the Walgreens-Rite Aid deal was completed. With the termination of the merger, Fed's received a termination fee of $25 million.
Napa Auto Parts (owned by Genuine Auto Parts)
GPC 6,000 1925 $687.24 $13.98 Napa Auto Parts accounted for 53% of Genuine Auto Parts net sales.
Pier 1 Imports PIR 1,018 1962 $30.13 $0.35 Pier 1 expects to close approximately 100 stores over the next 3 years, mostly through lease expirations.
Mattress Firm (owned by Steinhoff International Holdings)
STNHY 3,500 1986 $64.52 $1.11 Mattress Firm was bought by Steinhoff in August 2016. Steinhoff is a furniture conglomerate with a retail presence in over 30 countries.
Tractor Supply Co. TSCO 1,738 1938 $437.12 $7.88 Tractor Supply has increased their store count by 136% over the last 10 years.
Interested in Calkain’s Research [email protected]
CREDIT RATING REPORT OCTOBER 2017
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RESEARCH
R E S E A R C H @ C A L K A I N . C O M C A L K A I N . C O M4
Unrated Tenants - Unlisted TENANT NET INCOME STORE
COUNT FOUNDED NOTES
ALDI $10.1B in annual sales 1,689 1948 Owned by a German company who also owns Trader Joe's. By 2018, ALDI will bring its total number of US store to nearly 2,000.
Arby's $3.6B in sales (2016) 3,300 1964 Owned by private equity firm Roark Capital Group.
Ashley Furniture $3.85B in annual revenue 700 1970 Privately owned by a father and son team.
Aspen Dental $645M in annual revenue 550 1964 Owned by PE companies, Leonard Green & Partners and Ares Capital.
Bass Pro Shops $4.45B in annual revenue 177 1971 Acquired Cabela's Inc. in October of 2016, uniting the two biggest sellers of outdoor
sports gear. Captain D's $1.5B in annual sales 520 1969 Privately owned fast casual seafood chain.
Chick-fil-A $7.97B in annual sales (2016) 2,102 1946 Has the highest sales per location of any QSR restaurant.
Church's Chicken $1B in annual sales 1,600 1952 Private fast food chain with locations in 27 countries.
Giant Eagle $9.3B in annual sales 218 1931 Privately owned and largest supermarket chain in Western Pennsylvania.
Hobby Lobby $4B in annual revenue 750 1972 One-stop-shop for craft supplies.
Imagine School $234M in annual revenue 57 2004 Operates charter schools.
PDQ $28M in annual sales 62 2011 Florida based fast-casual chain.
Publix Super Markets
$34B in annual revenue (2016) 1,154 1930 Employee owned corporation.
RaceTrac $9.1B in annual revenue 670 1934 Gas station and convenience store. 42nd largest privately owned US company.
Royal Farms $80M in annual revenue 178 1959 Privately owned gas station and convenience stores. Actively expanding in Maryland, Delaware, Virginia, and Pennsylvania.
The Save Mart Companies
$4.2B in annual revenue (2016) 207 1952 Formerly Save Mart Supermarkets, owns Lucky, Food Maxx, and S-Mart.
Sheetz $5.6B in annual revenue 550 1952 Family owned and operated convenience stores open 24/7. Named convenience store of the year in 2017.
Steak 'n Shake $804M in annual revenue (2016) 590 1934 Steak ‘n Shake Operations, Inc. is a wholly owned subsidiary of Biglari Holdings Inc.
Tilted Kilt $250M in annual revenue 26 2003 Privately owned Celtic-themed sports bar and franchise restaurant chain.
Wawa $9.02B in annual revenue 750 1964 Privately owned gas station and convenience stores, opening 50+ stores per year.
Wegmans $8.3B in annual sales (2016) 94 1916 Privately owned supermarket chain.
Zaxby's $1B in annual sales 800 1990 Fast-casual chicken chain.
CREDIT RATING REPORT OCTOBER 2017
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RESEARCH
R E S E A R C H @ C A L K A I N . C O M C A L K A I N . C O M5
MOODY’S S&P FITCH DBRSTIER GRADE
LONG-TERM SHORT-TERM LONG-TERM SHORT-TERM LONG-TERM SHORT-TERM LONG-TERM SHORT-TERM
Aaa
P-1
AAA
A-1+
AAA
F1+
AAAR-1H
PRIME
Aa1 AA+ AA+ AA(high)HIGH
GRADEAa2 AA AA AAR-1M
Aa3 AA- AA- AA(low)A1 A+
A-1A+
F1A(high)
R-1L UPPER MEDIUM GRADEA2 A A A
A3P-2
A-A-2
A-F2
A(low)Baa1 BBB+ BBB+ BBB(high) R-2H
LOWER MEDIUM GRADEBaa2
P-3BBB
A-3BBB
F3BBB R-2M
Baa3 BBB- BBB- BBB(low) R-2L, R-3Ba1
Not prime
BB+
B
BB+
B
BB(high)
R-4 NON-INVESTMENT
GRADE SPECULATIVE
Ba2 BB BB BBBa3 BB- BB- BB(low)B1 B+ B+ B(high)B2 B B B
R-5
B3 B- B- B(low)Caa1 CCC+
C CCC C
CCC(high)SUBSTANTIAL
RISKSCaa2 CCC CCCCaa3 CCC- CCC(low)
Ca
CCCC(high)
EXTREMELY SPECULATIVE
CCCC(low)
CC(high)
CC(low)
C D /
DDD
/ D D IN DEFAULTDD
D
Chart Rating Tiers
CREDIT RATING REPORT OCTOBER 2017
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RESEARCH
R E S E A R C H @ C A L K A I N . C O M C A L K A I N . C O M6
YEARSS&P MOODY'S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
AAA Aaa 0.00 0.03 0.13 0.24 0.35 0.46 0.52 0.60 0.66 0.72 0.75 0.78 0.81 0.88 0.94
AA+ Aa1 0.00 0.05 0.05 0.11 0.16 0.22 0.28 0.33 0.40 0.46 0.52 0.59 0.65 0.72 0.79
AA Aa2 0.02 0.03 0.09 0.22 0.37 0.49 0.62 0.73 0.83 0.93 1.01 1.08 1.19 1.26 1.33
AA- Aa3 0.03 0.09 0.18 0.26 0.35 0.47 0.54 0.60 0.66 0.72 0.78 0.85 0.88 0.93 0.98
A+ A1 0.05 0.10 0.21 0.35 0.47 0.57 0.69 0.82 0.97 1.12 1.27 1.43 1.61 1.83 2.02
A A2 0.06 0.16 0.25 0.37 0.51 0.71 0.90 1.08 1.29 1.53 1.73 1.89 2.03 2.13 2.32
A- A3 0.07 0.18 0.29 0.42 0.60 0.78 1.04 1.23 1.38 1.51 1.63 1.79 1.94 2.08 2.19
BBB+ Baa1 0.12 0.32 0.56 0.82 1.08 1.39 1.63 1.88 2.16 2.44 2.72 2.92 3.18 3.51 3.88
BBB Baa2 0.17 0.44 0.69 1.08 1.47 1.87 2.23 2.60 2.99 3.39 3.80 4.17 4.46 4.57 4.79
BBB- Baa3 0.26 0.81 1.48 2.24 3.01 3.70 4.32 4.90 5.39 5.84 6.34 6.76 7.15 7.71 8.13
BB+ Ba1 0.36 1.17 2.12 3.09 4.08 5.02 5.82 6.41 7.10 7.79 8.23 8.75 9.25 9.66 10.27
BB Ba2 0.58 1.79 3.57 5.22 6.87 8.19 9.39 10.38 11.31 12.12 12.94 13.65 14.05 14.36 14.77
BB- Ba3 1.05 3.28 5.60 7.96 10.01 12.02 13.68 15.28 16.55 17.66 18.50 19.18 19.94 20.67 21.27
B+ B1 2.15 5.89 9.51 12.59 14.98 16.83 18.54 20.02 21.41 22.66 23.68 24.41 25.11 25.76 26.41
B B2 3.89 8.85 13.03 16.18 18.57 20.77 22.28 23.34 24.27 25.25 26.04 26.75 27.37 27.93 28.55
B- B3 7.49 14.64 19.91 23.59 26.42 28.53 30.21 31.25 31.95 32.48 33.19 33.73 33.96 34.24 34.55
CCC/C Caa1/Ca 26.78 35.88 40.96 44.06 46.42 47.38 48.56 49.52 50.38 51.03 51.55 52.10 52.81 53.37 53.37
Investment Grade 0.10 0.27 0.46 0.71 0.96 1.21 1.45 1.67 1.89 2.11 2.33 2.51 2.69 2.86 3.05
Speculative Grade 3.83 7.48 10.63 13.20 15.29 17.01 18.45 19.65 20.71 21.67 22.47 23.13 23.73 24.27 24.80
All Rated 1.52 2.99 4.27 5.35 6.25 7.02 7.67 8.22 8.72 9.18 9.58 9.91 10.22 10.50 10.78
Source: S&P
Global Corporate Average Cumulative Default Rates(1981-2016) (%)
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CALKAIN RESEARCH12930 Worldgate Drive, Suite 150
Herndon, VA 20170
(703) 787-4714
CALKAIN.COM
Interested in Calkain’s Research [email protected]