S&P cuts Interstate Bakeries to CCC+

Standard & Poor's said it lowered its corporate credit and senior secured debt ratings on fresh baked bread manufacturer Interstate Bakeries Corp. to CCC+ from B+. The company's preliminary subordinated shelf rating was lowered to CCC- from B-.

The outlook is developing.

S&P said the rating actions reflect the company's continued weak operating performance, which resulted in an earnings loss for the third quarter of 2004. Furthermore, Interstate Bakeries indicated that by the end of fiscal 2004 or the beginning of fiscal 2005, it might not be able to meet the provisions of its credit agreement, amended in April 2003. As a result, the company could default on its loans if its results do not improve in the fourth quarter.

As of March 6, 2004, Interstate Bakeries' financial leverage was aggressive: Its total debt to EBITDA was approximately 3.9x, while EBITDA to interest coverage was 3.1x. S&P said it expects credit measures to weaken further in the near term because of higher ingredient and fuel costs and continued volume and price pressures in the company's core brands.

As a result, S&P said it has concerns that Interstate Bakeries will be unable to meet its financial covenant requirements in the next couple of quarters, especially as the EBITDA interest coverage requirement increases to 4.00x in May 2004 and the total debt to EBITDA requirement is adjusted to 3.25x.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.