Moody’s rates Hostess CFR B2; loans B1, Caa1

Moody's Investors Service said it assigned a B2 corporate family rating and B2-PD probability of default rating to Hostess Holdco, LLC, a B1 rating to its proposed $100 million first-lien revolving credit facility and proposed $825 million first-lien term loan and a Caa1 rating to its proposed $400 million second-lien term loan.

The outlook is stable.

Proceeds will be used to fund a $905 million distribution to shareholders and refinance $344 million of existing debt.

Moody’s said the B2 corporate family rating reflects high financial leverage resulting from a large debt-financed shareholder distribution and the agency’s expectation that financial policies of the sponsor-owned company will likely remain aggressive, especially in terms of financial leverage.

Hostess’ limited operating track record, concentrated plant operations and relatively small scale are also reflected in the rating.

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