Moody's assigns Shearer’s loans B1, Caa1

Moody’s Investors Service said it assigned a B1 rating to Shearer’s Foods LLC’s new first-lien term loan and a Caa1 rating to the second-lien term loan.

Moody’s also upgraded the company’s corporate family and the probability of default ratings to B2 and B2-PD from B3 and B3-PD, respectively.

Proceeds will be used to refinance Shearer’s first- and second-lien loans and extend the debt’s maturity to 2027 and 2028, respectively. Also, the company will repay a subordinated seller note, repay revolver borrowings and pay a one-time $388 million special dividend to equity sponsors including Ontario Teachers' Pension Plan.

“Moody's is upgrading the CFR to B2 because the rating agency expects that operational improvements that have generated efficiencies generated efficiencies and good business momentum as a result of pricing, mix shifts and innovation will sustain the improvement in margins achieved over the last 18 months. Improved earnings will provide sufficient free cash flow to reduce debt-to-EBITDA leverage to closer to 6x over the next year. Free cash has improved meaningfully over the last two years and Moody's projects that it will exceed $55 million over the next 12 months,” the agency said in a press release.

The outlook is stable.

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