Moody's rates Otis Spunkmeyer

Moody's Investors Service said it assigned a B1 rating to the new senior secured credit facilities of Otis Spunkmeyer Inc., including the $20 million senior secured revolving credit facility maturing 2010, $140 million senior secured term loan B maturing 2011, and $10 million senior secured term loan C maturing 2011. Moody's also raised the company's senior implied rating to B1 from B2.

The outlook is stable.

Proceeds from the new credit facilities will refinance Otis' existing $140 million credit facilities ($96 million outstanding, rated B1), repay $48 million of 19.5% discount notes at the holding company, and fund a prospective $10 million acquisition.

Moody's said the upgrade of Otis' senior implied rating reflects the company's success in retaining business with key customers, steady cash flow generation, and elimination of debt accruing at a high, 19.5% per annum, rate.

Otis' ratings are limited by its narrow product line (roughly 60% foodservice frozen cookie dough, 30% retail and foodservice muffins, and 10% other) and modest revenue base ($273 million net sales in fiscal 2003), combined with high leverage (4.6x pro forma debt/last-12-months EBITDA) and a weak balance sheet (69% intangible assets).

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.