Moody's upgrades KeHE Distributors

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

Moody's also said it affirmed the Caa1 (LGD 5) rating of the company's $200 million second-lien notes due 2021.

The outlook is stable.

The company's successful integration of past acquisitions, combined with top line growth, has resulted in improved earnings and credit metrics, Moody's said.

The agency said it expects the company's debt-to-EBITDA ratio to improve to about 4.5x in the next 12 months primarily due to EBITDA gains, the agency said.

The ratings reflect the company's adequate liquidity and improving leverage, which is estimated to be about 4.7x, Moody's said.

The company's operating expenses and capital expenditures have normalized after being higher than normal due to the integration of the operations of Nature's Best and Monterrey Provision Co., the agency said.

Profit dollars have improved as the company has controlled expenses while growing the topline through increased volume from existing and new customers, Moody's said.

The ratings are supported by the company's good position in a growing and attractive market niche for specialty, organic and natural foods and its geographic diversification, the agency said.

But the company is a relatively small player in the overall food distribution business segment, Moody's said.

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