Moody’s drops KeHE, notes

Moody's Investors Service said it downgraded the corporate family rating and the probability of default rating of KeHE Distributors, LLC to B3 and B3-PD from B2 and B2-PD, respectively.

Concurrently, the agency downgraded the $200 million second-lien notes due 2021 to Caa1 from B3.

The outlook is stable.

"Despite the growth in the company's revenues, earnings and credit metrics are much weaker than our original expectations at the time of the company's acquisition of Nature's Best in 2014 due to higher expenses related to the integration and we do not expect significant improvement in metrics in the next 12 months," Moody’s senior analyst Mickey Chadha said in a news release.

"The rating downgrade also acknowledges KeHE's weaker liquidity as a result of negative free cash flow and higher borrowings under its revolving credit facility."

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