Moody's cuts Whatabrands

Moody's Investors Service said it downgraded Whatabrands LLC's corporate family rating to B2 from B1, probability of default rating to B2-PD from B1-PD and senior secured rating to B2 from B1. Moody's also assigned a B2 ratings to the company's planned $2.3 billion senior secured term loan B and $200 million revolving credit facility, which will replace its capital structure.

"The downgrade was prompted by governance considerations particularly Whatabrands decision to significantly increase debt to support a material return to shareholders of about $1.0 billion," stated Bill Fahy, Moody's senior credit officer, in a press release. The $1 billion of incremental debt will result in debt to EBITDA increasing to over 6.5 times from about 4.7 times for the LTM period ending March 31, 2021. "Overall, we view the debt financed share repurchase as the adoption of a more aggressive financial strategy."

Term loan proceeds will be used to repay Whatabrands $1.22 billion term loan, repurchase $1 billion of preferred stock, place about $50 million of cash on the balance sheet and pay fees and expenses.

The outlook is stable.

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