S&P rates Milk B, loans B+, CCC+

Standard & Poor's said it assigned a preliminary B corporate credit rating to Milk Holding Corp. and Milk Acquisition Corp.

The agency also said it assigned preliminary B+ ratings to the company's proposed $25 million revolving credit facility due 2016 and $145 million first-lien term loan due 2017.

The preliminary recovery rating is 2, indicating 70% to 90% expected recovery in a default.

The agency also said it assigned a preliminary CCC+ rating to the company's proposed $60 million second-lien term loan due 2018.

The preliminary recovery rating is 6, indicating 0% to 10% expected recovery in a default.

The outlook is stable.

The proceeds will be used for the purchase of the company by HM Capital Partners, to refinance the company's existing debt outstanding and a capital expenditure reimbursement to the company, S&P said.

The ratings incorporate the assumption that Milk Acquisition, a wholly owned subsidiary of Milk Holdings and the initial borrower of the senior secured credit facilities, will be merged with and into Milk Specialties Co., with the latter company being the surviving entity, the agency said.

The ratings reflect the company's narrow focus on whey-based products, significant reliance on whey supply, participation in highly competitive and fragmented industries, and exposure to potential negative publicity or studies, S&P said.

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