S&P rates Otis Spunkmeyer loan

Standard & Poor's said it affirmed its B+ corporate credit and senior secured debt ratings on Otis Spunkmeyer Inc. and removed all the ratings from CreditWatch, where they were placed Oct. 1.

At the same time, S&P assigned its B+ rating and a recovery rating of 3 to Otis Spunkmeyer's proposed $170 million senior secured credit facility.

The outlook is negative.

Proceeds from the new credit facility will be used to refinance the company's existing credit facility, which has about $91.8 million outstanding, and repay $48.8 million of subordinated debt at the holding company (unrated).

S&P said the ratings reflect Otis Spunkmeyer's high debt leverage, weaker-than-expected credit measures following its leveraged buyout by Code Hennessey & Simmons in 2002, and its narrow business focus. Mitigating these rating concerns are the company's improved operating performance in the last two quarters, its leading market share in the frozen cookie dough segment, strong brand recognition, and a solid niche distribution infrastructure.

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