Moody's Places Pinnacle Foods Finance on Watch for Downgrade (PF) (BDBD)

Moody's Investors Service ("Moody's") has placed the Ba3 Corporate Family Rating, Ba3-PD Probability of Default Rating and debt instrument ratings of Pinnacle Foods Finance, LLC ("Pinnacle") under review for downgrade following today's announcement that its parent company, Pinnacle Foods, Inc. (NYSE: PF), has entered into a definitive agreement to acquire Boulder Brands, Inc. ("Boulder", B2). The SGL-2 Speculative Grade Liquidity rating is unaffected, subject to Moody's further review of transaction details.

Pinnacle plans to launch a cash tender offer for Boulder Brands shares that values the company at $975 million, including $265 million of net debt. The transaction is expected to be completed in the first quarter of 2016.

Moody's review for downgrade reflects the higher financial leverage that will result from the transaction, along with significant integration risk. In addition, today's rating action reflects Moody's need to assess important details of Pinnacle's operating plan, including the timing and sources of significant targeted cost savings and its plans to stabilize and grow Boulder's core business lines.

"Whether Pinnacle can successfully increase Boulder's $60 million of run-rate EBITDA by 50% according to its plan, will depend largely on its ability to stabilize the declining Smart Balance franchise and to address various operating challenges the company has faced in recent years," commented Brian Weddington, a Moody's VP-Senior Credit Officer. "As a result, we think the execution risk on achieving these savings could be quite high," added Weddington.

Moody's review will focus on Pinnacle's operating strategy for the Boulder business, the timing and sources of anticipated cost savings, its financing plans, and the de-leveraging potential subsequent to the Boulder Brands purchase including future acquisition strategies.

Ratings Placed under Review for Downgrade

Pinnacle Foods Finance LLC:

Corporate Family Rating at Ba3;

Probability of Default Rating at Ba3-PD;

Senior Secured Bank Credit Facility at Ba2/LGD3;

Gtd Senior Unsecured at B2/LGD6.

Pinnacle Foods Finance LLC's SGL-2 Speculative Grade Liquidity rating is not affected.

RATING RATIONALE

Pinnacle's existing Ba3 Corporate Family Rating (CFR) reflects the company's portfolio of mature brands in frozen and shelf-stable food categories that generate relatively stable operating performance, albeit with limited growth potential. Pinnacle competes successfully against food companies with greater scale, capital resources and pricing power by focusing on optimizing its brand investment and maintaining efficient operations. The rating also reflects Moody's expectation for debt-financed acquisitions to be followed by an ample period of de-leveraging to restore credit metrics.

You May Also Be Interested In

• Accenture Federal Services (ACN) to Acquire Cognosante
• Ducommun (DCO) Rejects Unsolicited, Non-Binding Indication of Interest From Albion River
• Evercore ISI starts 'accelerating AI play' AMD (AMD) at Outperform