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Moody's rates Del Monte B1
Moody's Investors Service said it assigned a provisional corporate family rating of B1 to Del Monte Foods Co., an intermediate holding company and parent of Del Monte Corp.
The agency assigned provisional ratings of Ba3 (LGD3, 32) to the proposed $2.5 billion senior secured term loan and B3 (LGD5, 85) to $1.5 billion of proposed senior secured notes, to be issued in connection with the planned leveraged buyout of publicly traded Del Monte by an investor group led by Kohlberg Kravis Roberts & Co. LP.
The outlook is stable.
The provisional debt ratings reflect the high financial leverage that will result from the planned LBO, balanced against the stable operating-level performance anticipated at Del Monte with improving product mix, according to the agency.
Del Monte's credit metrics had been trending positively in recent years with a debt-to-EBITDA ratio that recently fell below three times compared with over five times a few years ago, which reflects a more focused portfolio following the Starkist canned tuna sale in 2009 that accelerated the company's strategy to shift its sales mix way from consumer foods and toward the higher margin pet food business, the agency said.
Moody's said it estimates that at closing of the LBO, pro forma debt-to-EBITDA ratio will about 6.7 times, but could decline to below 6 times by the end of fiscal 2012.
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