City Brewing, Dotdash Meredith loans see downgrades from Moody’s; secondary market slides

By Sara Rosenberg

New York, Dec. 15 – City Brewing Co. LLC’s credit facilities and Dotdash Meredith Inc.’s credit facilities were both downgraded by Moody’s Investors Service during Thursday’s market hours.

Meanwhile, the secondary loan market in general was lower in sympathy with high-yield and equities.

City Brewing cut

City Brewing’s ratings were downgraded by Moody’s in the afternoon, with the corporate family and senior secured credit facilities ratings dropped to Caa2 from B3. The rating outlook remains negative.

Prior to the downgrade, the company’s term loan was quoted at 48 bid, 53 offered, a market source remarked.

Moody’s said the downgrade was prompted by a weaker than expected third quarter ended September 2022 which failed to show anticipated recovery sequentially or year over year over an already weak second half of 2021.

The downgrades also reflect the company’s high projected leverage and weak liquidity that increases the risk of a distressed exchange or other default if an operational turnaround is not executed, the rating release continued.

Moody’s now expects pro-forma debt to EBITDA leverage to end full year 2022 in the mid-teens, compared with around just over 10x expected at the time of the last downgrade.

City Brewing is a La Crosse, Wis.-based producer and packager of alcoholic and non-alcoholic beverages.

Dotdash downgraded

Dotdash Meredith was also downgraded by Moody’s during the session, with the corporate family ratings and senior secured credit facilities cut to B2 from B1.

Prior to the downgrade, the company’s term loan was quoted at 86¾ bid, 87¾ offered, a market source remarked.

The downgrade reflects the impact of slowing economic growth on advertising demand, which will weigh on the company’s operating performance and stall deleveraging, Moody’s said in a release. The outlook remains stable.

Moody’s currently projects the company’s year-end 2022 leverage, as measured by total debt to EBITDA, will peak at roughly 7.4x and free cash flow to total debt will be in the range of negative 6%. However, the rating agency also said that it expects leverage will decrease to the 6.5x area at the end of 2023 and retreat further to around 5.5x by year end 2024.

Dotdash Meredith is a New York-based internet property and consumer media publisher.

Secondary softens

The secondary loan market was lower in general on Thursday by about an eighth of a point to a quarter of a point, according to a market source.

The source went on to say that high-yield was probably down by about half a point and equities were lower as well.

Nasdaq fell 360.36 points, or 3.23% on Thursday, Dow Jones Industrial Average dropped 764.13 points, or 2.25%, and S&P 500 fell 99.57 points, or 2.49%.

Fund flows

In other news, actively managed loan fund flows on Wednesday were negative $197 million and loan ETFs were positive $16 million, market sources said.

The tracking estimate for Thursday night’s weekly Lipper numbers for loans are outflows totaling $1.03 billion, which would be the first outflows of a billion or more for leveraged loan funds since the week ending Oct. 12, sources added.

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