Assessment of liquidity and capital resources
Credit ratings
Cash flows
December 2003 Credit Facility and enter into a bilateral
letter of credit facility (the "2005 L/C Facility"). On May
17, 2005 we signed the new five-year EUR 2 billion May
2005 Credit Facility, which has more favorable terms and
conditions than the December 2003 Credit Facility. Under
the May 2005 Credit Facility, we are subject to financial
and other covenants, including maintaining a certain
leverage ratio. We intend to use this facility for general
corporate purposes and the issuance of letter of credit. The
facility remained undrawn at the end of 2005 except for
EUR 588 million (USD 696 million) used for letters of
credit. As of March 28, 2006, the facility remained
undrawn except for EUR 653 million (USD 774 million)
used for letters of credits. For further details, see Note 26
to our consolidated financial statements included in this
annual report.
Based on our current operating performance and
strengthened liquidity position, we believe that cash
provided by operating activities and available cash balances
will be sufficient for our working capital, capital
expenditures, interest payments, litigation settlement and
scheduled debt repayment requirements for the next
12 months and the foreseeable future. We will continue
to assess our liquidity position and potential sources of
supplemental liquidity in view of our operating performance
and other relevant circumstances. We have certain off-
balance sheet commitments and contingencies that may
have significant future cash requirements. For additional
information about our commitments and contingent
liabilities, see the discussion in "Contractual obligations"
and "Off-balance sheet arrangements" below and in Note
35 to our consolidated financial statements included in
this annual report.
Our credit ratings are periodically reviewed by credit rating
agencies and communicated to financial markets and
investors. Our Road to Recovery strategy and progress over
the past three years have positively impacted the ratings
assigned to Ahold by Moody's and S&P's. Improving these
ratings is an important part of our overall management
strategy as they serve to lower our cost of funds and to
facilitate our access to a variety of lenders and markets. We
are focused on working towards meeting what we understand
to be the criteria for investment grade rating from the two
applicable rating agencies.
The following table sets forth our credit ratings as of
January 1, 2006 and January 2, 2005:
January 1,
2006
January 2,
2005
Moody's
Long-term rating
(corporate family rating)
Ba2
Ba2
Outlook
Positive
Positive
Standard Poor's
Long-term rating
(local and foreign issuer)
BB+
BB
Outlook
Stable
Positive
On August 5, 2005 S&P's raised our long-term corporate
credit ratings to 'BB+' from 'BB' and assigned a stable
outlook. At the same time, S&P's raised the ratings of our
senior unsecured notes to 'BB' from 'BB-' and affirmed our
'B' short-term corporate credit rating.
On January 16, 2006, Moody's upgraded our corporate
family rating and senior unsecured debt term rating to Ba1
from Ba2 and maintained our positive outlook. On February
4, 2005, Moody's maintained our corporate family rating
(formerly senior implied rating) at Ba2 and raised our issuer
rating and our senior unsecured debt rating to Ba2 from
Ba3, raised our subordinated debt rating to Ba3 from B1
and confirmed our positive outlook.
Over the past three years through our successful execution
of the Road to Recovery strategy, substantial cash
generation has resulted primarily from the completion of
the 2003 Rights Offering, which generated net proceeds
of EUR 2.9 billion in 2003, as well as the divestment of
non-core businesses and underperforming assets that
contributed net cash flow proceeds, net of cash divested,
of EUR 989 million, EUR 931 million and EUR 274 million
in 2005, 2004 and 2003, respectively. The cash we
generated was partially used to reduce gross debt by EUR
2.3 billion, EUR 1.5 billion and EUR 2.1 billion in 2005,
2004 and 2003, respectively. We believe that our continued
focus on cash flow generation will allow us to continue to
strengthen our balance sheet, to build a solid platform for
funding organic and strategic growth and to pursue further
cost reduction opportunities and working capital
efficiencies.
For a further discussion on cash flows, see Note 32 to our
consolidated financial statements included in this annual
report.
AHOLD ANNUAL REPORT 2005 75
