Moody's cuts Sunny Delight

Moody's Investors Service said it lowered the ratings assigned to the proposed senior secured debt of Sunny Delight Beverages Co. due to material shortfalls in actual results for its fourth quarter and fiscal year ended June 30 relative to the company's forecast.

Given that these lower results are the baseline for projections, the ratings were adjusted to reflect the likely continuation of business challenges in Europe, which are the primary drag on earnings, the agency said. Run-rate financials are constrained by the lack of product innovation and unsuccessful product introductions in European operations, competition, and adverse weather conditions.

Sunny Delight's proposed credit facilities, initially rated on May 19, were never executed. On Friday Moody's lowered Sunny Delight's proposed ratings as follows: proposed $40 million first-lien five-year revolver to B1 from Ba3 (proposed revolver was downsized by $10 million), proposed $170 million six-year first-lien term loan to B1 from Ba3 (proposed loan was downsized from $250 million that included a $100 million equivalent euro loan, which has since been eliminated), and proposed $85 million six-year second-lien term loan to B2 from B1 (proposed loan was upsized from $75 million for which only $35 million was intended to be funded at closing; the proposed $85 million will now be fully drawn at closing).

Moody's also lowered the senior implied rating to B1 from Ba3 and the senior unsecured issuer rating to B3 from B2 (non-guaranteed exposure).

The outlook is stable.

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