Moody's rates Michael Foods loans Ba3

Moody's Investors Service said it assigned a Ba3 rating (LGD3, 34%) to Michael Foods, Inc.'s proposed $75 million 31/2-year first-lien revolving credit agreement and $450 million senior secured term loans and changed the outlook to positive from stable.

The company's B1 corporate family and B1 probability-of-default ratings were affirmed. M-Foods Holdings, Inc.'s corporate family and probability-of-default ratings were affirmed at B1 and 9¾% senior discount notes due 2013 were affirmed at B3 (LGD6, 92% from 94%).

"The change in outlook to positive from stable reflects strengthened credit metrics from the application of operating cash flow to debt reduction since the 2003 leveraged buyout. Michael's internal cash flow generation is less volatile than that of many other natural products processors; Michael's leading and significant market share in egg products allows the company to maintain fairly steady reported EBITDA," Elaine Francolino, Moody's vice president, said in a statement.

The affirmation incorporates Michael's position as North America's largest egg products producer, its solid organic volume growth and its comfortable liquidity, the agency said.

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