Moody’s rates Matterhorn B3, facilities B2

Moody's Investors Service said it assigned a B3 corporate family rating and B3-PD probability of default rating to Matterhorn Merger Sub, LLC (the legal entity that will acquire H-Food Holdings, LLC, parent of Hearthside Group Holdings, LLC).

At the same time, the agency assigned a B2 (LGD 3) rating to Matterhorn's proposed $150 million first-lien revolving credit facility and $1.12 billion first-lien term loan.

The outlook is stable.

The company also plans to issue up to $375 million of unsecured debt as part of this transaction.

Matterhorn will use proceeds from the first-lien term loan, unsecured debt and $979 million of cash equity to purchase H-Food Holdings, LLC and repay existing debt. Matterhorn will be merged into H-Food Holdings, LLC with H-Food Holdings being the surviving entity. H-Food Holdings is being acquired by an investment group led by Charlesbank Capital Partners and Partners Group.

Moody's will withdraw its ratings on Hearthside and its existing rated debt once the transaction is completed.

“Matterhorn's B3 Corporate Family Rating reflects its high financial leverage and significant customer concentration with its two primary customers representing approximately half of its sales and a significant portion of earnings,” the agency said in a news release.

“It also reflects event risk, such as leveraged acquisitions and aggressive shareholder returns, given its financial sponsor ownership.”

The first-lien revolver and term loan are rated B2, one notch higher than the corporate family rating. This reflects the agency’s expectation of a higher recovery on these secured obligations compared to the recovery on a meaningful amount of lower priority obligations.

The revolver and term loan will be secured by substantially all of the company's assets.

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