Moody's downgrades GNC

Moody's Investors Service said it downgraded GNC Parent Corp.'s corporate family and probability-of-default ratings to B3 from B2, senior secured bank loan to Ba3 (LGD 1, 4%) from Ba2, $150 million 8 5/8% senior notes due 2011 to B1 (LGD2, 25%) from Ba3, $425 million note issue to Caa2 (LGD5, 84%) from Caa1 and affirmed the $215 million 8½% senior subordinated notes due 2010 at B3 (LGD 4, 56%).

The ratings were reassigned to GNC Parent from General Nutrition Centers, Inc. The outlook is stable.

The $425 million note issue was upsized from $325 million and proceeds will be used to retire the company's payment-in-kind preferred stock for $149 million and to pay a $287 million dividend.

The downgrade was prompted by Moody's opinion that the incremental debt will cause financial flexibility to materially weaken. The company also announced that it is exploring strategic alternatives such as a sale of the company or an initial public offering.

GNC's ratings balance the company's aggressive financial policy, weak credit metrics and revenue vulnerability to new product introductions against its geographic diversification, the relative lack of cash flow seasonality, its scale and widespread consumer recognition of the GNC name, the agency said.

© 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.