Moody's rates Central Garden notes B3

Moody's Investors Service said it assigned Central Garden & Pet Co.'s proposed new $300 million subordinated notes a rating of B3 (LGD5, 80%), and affirmed its corporate family and probability-of-default ratings at B1 and senior secured revolving credit facility at Ba3 (LGD3, 39%).

The SGL 2 speculative grade liquidity rating was affirmed.

The outlook remains positive.

Proceeds are expected to be used to repay the subordinated notes and to repay a portion of the $300 million term loan.

The B1 corporate family rating reflects Central Garden's modest size, limited geographic diversification, seasonality and weather dependency of its business, and single digit operating margins, the agency said.

The rating also incorporates the challenges posed by its large retail customers and the significant competition inherent in the highly fragmented industries, the agency noted.

The rating is supported by the company's strong market position in pet and lawn & garden, an improved liquidity profile and good credit metrics highlighted by modest financial leverage of around 3x and good cash flow to debt ratios, according to Moody's.

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