S&P rates Del Monte loan B

S&P said it rated Del Monte Foods Inc.’s planned $525 million term loan B with a 3 recovery rating. The recovery rating indicates an expectation for meaningful (50%-70%; rounded estimate: 65%) recovery in default. S&P also affirmed Del Monte’s B issuer rating and revised the outlook to positive from stable.

Del Monte plans to use the term loan and an incremental draw on its asset-based lending revolver of about $30 million, to refinance its 11 7/8% secured notes and cover $55 million in prepayment fees and expenses.

The agency said it expects to withdraw the rating on the bonds after the transaction closes, expected in May.

“The positive outlook reflects that we could raise the ratings over the next year if the company maintains improved operating performance, leverage below 5x, and positive free operating cash flow,” S&P said in a press release.

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