S&P downgrades KeHE

Standard & Poor’s said it lowered the corporate credit rating on KeHE Distributors Holdings LLC to B- from B.

The agency also said it lowered the rating on the company’s $200 million second-lien notes due 2021 to CCC+ from B-. The recovery rating remains at 5, reflecting 10% to 30% expected default recovery.

KeHE is the parent company of KeHE Distributors LLC and KeHE Finance Corp., which are co-issuers of the notes.

S&P also said it lowered the rating on KeHE’s $575 million ABL revolving credit facility to B+ from BB-. The recovery rating remains at 1, indicating 90% to 100% expected default recovery.

The outlook is stable.

Pressure on operating margins has led to credit metrics below expectations, which led to the downgrade, the agency said.

Aggressive consolidation among key grocery distribution players could continue to pressure KeHE to pursue mergers and acquisitions faster than it can integrate new business in coming years, S&P said.

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