S&P cuts KeHE notes to B-

Standard & Poor's said it lowered its corporate credit rating on KeHE Distributors Holdings LLC to B from B+.

The outlook is stable.

At the same time, the agency lowered its issue-level rating on the company’s $200 million second-lien notes due 2021 to B- from B.

KeHE is the parent company of KeHE Distributors LLC and KeHE Finance Corp., which are co-issuers of the second-lien notes. The 5 recovery rating is unchanged.

S&P also assigned a BB- issue-level rating to KeHE’s $400 million ABL revolving credit facility with a 1 recovery rating.

"The downgrade reflects our expectation that KeHE’s credit protection measures will be weaker than previously anticipated over the next two years as a result of the incurrence of additional debt to finance the acquisition of Nature’s Best," S&P credit analyst Kristina Koltunicki said in a news release.

"We believe the acquisition will broaden KeHE’s geographic presence and strengthen its market position as the second-largest specialty and natural and organic (N&O) distributor, behind United Natural Foods Inc. (not rated). However, the acquisition will double the company’s reported debt, leading to a moderate increase in leverage for at least the next year."

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