New York, December 06, 2012 -- Moody's Investors Service today affirmed Academy, Ltd.'s ("Academy") B2 Corporate Family Rating and assigned a Caa1 rating to the proposed $400 million Senior Notes due 2018 ("Proposed Notes") to be issued by Academy's newly-formed indirect parent company, New Academy Finance Company LLC ("New Academy HoldCo"). The rating outlook is stable.

Proceeds from the Proposed Notes will be used to fund a distribution to shareholders and pay related fees and expenses. The Proposed Notes will be senior, unsecured obligations of New Academy HoldCo, and will not be guaranteed by any entity in the corporate group. New Academy HoldCo is required to pay interest entirely in cash so long as there is restricted payment capacity for upstream dividends at the Academy level under the agreements governing Academy's existing senior secured credit facilities and existing senior unsecured notes.

The rating is subject to review of final documentation. Upon completion of the transaction, Academy's Corporate Family and Probability of Default ratings will be withdrawn and assigned to New Academy HoldCo.

Moody's took the following rating actions for New Academy HoldCo:

-- Senior unsecured notes due 2018 assigned Caa1 (LGD 6, 93%)

Moody's took the following rating actions for Academy, Ltd.:

-- Corporate Family Rating affirmed at B2;

-- Probability of Default Rating affirmed at B2;

-- Senior secured term loan due 2018 affirmed at B2 (LGD3, 49%);

-- Senior unsecured notes due 2019 affirmed at Caa1 (LGD5, 86%).

Should the transaction close as proposed, the rating on Academy's existing secured term loan due 2018 will likely be upgraded to B1 and the rating on Academy's existing unsecured notes due 2019 will likely be upgraded to B3. Consistent with Moody's Loss Given Default Methodology, the upgrades would reflect the increase in debt cushion in the capital structure as a result of the proposed issuance of structurally subordinated New Academy HoldCo debt.

RATINGS RATIONALE

While the increase in debt and leverage is a credit negative, the affirmation of Academy's B2 corporate family rating reflects Moody's expectation for leverage reduction over the next twelve months through continued revenue and earnings growth, led by positive same-store sales, new store openings and continued cost savings initiatives.

Academy's B2 Corporate Family Rating is constrained by the high debt and leverage that stem from the August 2011 acquisition by an affiliate of Kohlberg Kravis Roberts & Co L.P. ("KKR"), as well as the current proposed dividend. Pro forma for the transaction, lease-adjusted debt/EBITDA will likely rise to about 6.25 times for the latest twelve month period ended October 27, 2012, up from about 5.2 times. The rating also reflects Academy's limited geographic presence, small scale relative to other global retailers, and the potential challenges inherent in its planned ramp-up of new store growth over the intermediate-term.

The rating favorably reflects the strength of the company's "Academy Sports + Outdoor" brand, its good market position in the region where it operates, and its demonstrated ability to maintain profitable growth despite difficult economic conditions over the past several years. Academy's liquidity is expected to remain very good, supported by the expectation that its sizeable cash balance, positive free cash flow and excess revolver availability will be more than sufficient to fund working capital, capital spending, and debt amortization over the next twelve months.

The stable outlook reflects Moody's expectation that the company will continue to demonstrate profitable growth while maintaining solid liquidity and reducing leverage in the next twelve months.

Academy's ratings could be downgraded if operating performance were to materially decline, or if financial policies were to become more aggressive, leading to sustained deterioration in credit metrics or weaker liquidity. Debt/EBITDA above 6.5 times or interest coverage falling below 1.25 times on a sustained basis could drive a downward rating action.

Sustained growth in revenue and earnings while maintaining good liquidity could lead to a ratings upgrade. The company would also need to demonstrate the willingness to sustain a conservative financial policy, including the use of free cash flow for debt reduction. Specifically, an upgrade would require debt/EBITDA to be sustained below 5.5 times and EBITA/interest over 1.5 times.

The principal methodology used in rating Academy, Ltd. was the Global Retail Industry Methodology published in June 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Academy, Ltd., based in Katy, Texas, is a leading sports, outdoor and lifestyle retailer with a broad assortment of hunting, fishing and camping equipment and gear along with sports and leisure products, footwear, and apparel. The company operates 150 stores under the Academy Sports + Outdoor name in Texas and the southeastern United States. Revenue for the twelve months ended October 27, 2012 exceeded $3.4 billion. Academy was acquired by an affiliate of Kohlberg Kravis Roberts & Co L.P. ("KKR") in August 2011.

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Michael M. ZuccaroAsst Vice President - Analyst Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Kendra M. Smith MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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