Moody's may upgrade Otis Spunkmeyer

Moody's Investors Service said it placed Otis Spunkmeyer, Inc.'s B1 corporate family rating, B1 probability-of-default rating, Ba3 $22.5 million senior secured revolving credit facility (LGD3, 40%) and Ba3 $170 million senior secured term loan due 2012 (LGD3, 40%) on review for possible upgrade.

The review follows the announcement that Otis Spunkmeyer has entered into an agreement to be acquired by IAWS Group, plc for $561 million, including $340 million in equity, plus an additional $25 million if certain performance milestones are met.

The agency said its review will focus on Otis' cash flow generation ability as part of IAWS' operations, where Otis will legally reside within IAWS's organization, and whether or not IAWS will legally assume, guarantee or pay off Otis' debt.

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