S&P rates Whole Earth, facilities B

S&P said it assigned B ratings to Whole Earth Brands Inc. and its planned $75 million five-year revolving credit facility, $15 million drawn at close and a $375 million seven-year senior secured first-lien term loan B. The recovery rating on the debt is 3, reflecting an expectation for meaningful (50%-70%, rounded estimate: 65%) recovery in default.

“Our ratings reflect our expectation that good operating performance, free cash flow generation and prudent financial policy will enable the company to maintain leverage at about 4x. Upon the closing of the transaction, we estimate Whole Earth’s pro forma fiscal 2020 leverage to be approximately 5.1x on an adjusted basis and forecast it will decrease toward 4x in 2021 due to sales growth and lapping of one-time costs,” S&P said in a press release.

Whole Earth will use the term loan proceeds to refinance its capital structure and acquire WSO Investments.

The agency assigned a positive outlook. The outlook reflects the view S&P could raise the company’s rating over the next 12 months if good operating performance resulted in leverage declining below 4.5x. “This assumes strong demand for the company’s branded consumer products and successful execution of its channel penetration strategy,” S&P said.

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