S&P cuts Dessert Holdings

S&P said it lowered its ratings on Dessert Holdings (BCPE North Star Holdings LP) and its $155 million revolving credit facility, $855 million first-lien term loan, and $75 million first-lien delayed-draw term loan to CCC+ from B-. The agency also trimmed the issue-level rating on the company's $225 million second-lien term loan and $20 million second-lien delayed-draw term loan to CCC- from CCC.

“The downgrade reflects our view that DH's capital structure is unsustainable. DH maintains a heavy debt load due to its ownership by financial sponsors and its acquisitive growth strategy, with roughly $1.3 billion in funded debt. Since its leveraged buyout (LBO) by Bain Capital in 2021, the company has increased funded debt by about $800 million, primarily to fund the acquisitions of Steven Charles and Dianne's Fine Desserts (DFD),” S&P said in a press release.

The agency said it forecasts DH’s S&P Global Ratings-adjusted pro forma leverage was about 11.9x and EBITDA to interest coverage was 1.2x for the 12 months ended March 31. “We forecast credit metrics to remain weak but improving for the end of 2023 as EBITDA sequentially improves from pricing actions coming through.”

The outlook is negative.

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