Moody's ups Sovos Brands

Moody's Investors Service said it upgraded Sovos Brands Intermediate, Inc.'s corporate family rating to B2 from B3, and its probability of default rating to B2-PD from B3-PD. In addition, Moody's also affirmed the B2 ratings on Sovos' $125 million revolving credit facility and $580 million senior secured first-lien term loan and assigned a speculative grade liquidity rating of SGL-2.

“The rating upgrade reflects Moody's projections for a material reduction of leverage, to about 5.3x debt to EBITDA from 7.7x (Moody's adjusted) as of June 30, 2021, pro forma for the repayment of approximately $245 million of the company's first-lien and second-lien term loans using proceeds from the recently completed initial public offering (IPO),” Moody’s said in a press release.

The agency said it expects Sovos will apply a significant portion of the IPO proceeds to repaying the second-lien loan and use the remainder to pay down the first-lien loan.

“Moody's affirmed the B2 first-lien revolver and term loan ratings based on an expectation that the loss absorption cushion from the second-lien term loan will be eliminated or meaningfully reduced. If Sovos does not pay down the debt in this order, Moody's could change its ratings on the revolving credit facility and first-lien term loan,” the agency said.

The outlook is stable.

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