Moody’s downgrades Del Monte Foods, debt

Moody's Investors Service said it downgraded credit ratings of Del Monte Foods, Inc., including the corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD, first-lien senior secured debt to B3 from B2 and second-lien senior secured debt to Caa2 from Caa1.

The agency also assigned a SGL-3 speculative grade liquidity rating.

The outlook was revised to negative from stable.

Moody’s said the downgrades reflect Del Monte Foods' sustained high financial leverage, declining sales volume of the U.S. canned fruits and vegetable category, and high integration risk related to the recently acquired Sager Creek Vegetable Co. (formerly Allens, Inc.) that continues to generate operating losses.

The lowered ratings also reflect a more aggressive financial policy than the agency previously anticipated, especially in respect of the company's commitment to reduce financial leverage.

The company's credit profile is supported by the strength of the Del Monte brand, which holds leading shares in core shelf stable fruit and vegetable categories. The ratings also are supported by the company's "covenant-lite" structure of the bank term loans that reinforces an adequate liquidity profile, Moody’s said.

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