Moody's confirms Shearer's

Moody's Investors Service said it confirmed Shearer's Foods, Inc.'s B2 corporate family and probability of default ratings and its B1 (LGD 3, 39%) senior secured revolver and senior secured term loan B. This concludes the review for possible downgrade that Moody's initiated on May 17.

The outlook is negative.

The confirmation follows from Shearer's announcement that it has secured equity funding and completed an amendment to its credit agreement, the agency said. The amendment provides for improved financial covenant headroom, alleviating short-term liquidity concerns.

The negative outlook primarily reflects the concerns that Shearer's is still facing operational challenges as it executes its expansion plans in the midst of a difficult commodity cost environment over the next year, the agency added.

The ratings reflect the company's solid position in private label, co-pack and branded snack foods following the acquisition of Snack Alliance last year, a transaction which provided greater geographic, product and customer diversity to Shearer's, the agency said.

However, the ratings also reflect the company's relatively small scale, narrow focus on the salty snack sector and its increasing leverage as a result of expansion plans that have yet to generate improved cash flows, Moody's said.

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