S&P Removes Post Holdings (POST) from Watch Negative

Standard & Poor's Ratings Services affirmed all its ratings, including its 'B' corporate credit rating, on St. Louis-based Post Holdings Inc. (NYSE: POST). We assigned our 'BB-' issue-level rating to the company's proposed $735 million term loan B due 2021 and now $400 million revolving credit facility due 2019. The recovery rating on the senior secured facilities is '1', indicating our expectations for very high (90% to 100%) recovery in the event of a payment default. We assigned our 'B' issue-level rating to the company's proposed $630 million senior notes due 2022. The recovery rating on these notes is '4', indicating our expectations for average (30% to 50%) recovery in the event of a payment default. All ratings are subject to review upon receipt and review of final documentation. The outlook is stable.

"The rating actions reflect our view that Michael Foods will increase Post's operating scale, diversify its customer mix and sales channels, and add significant free operating cash flow," said Standard & Poor's credit analyst Bea Chiem. "However, we believe that Post has a limited operating track record under its new operating model and in its acquired businesses and has yet to realize meaningful synergies," continued Ms. Chiem.

Proceeds from the proposed new debt, along with roughly $800 million cash, $200 million in proposed mandatory convertible tangible equity units, and $200 million in proposed common equity, will fund the acquisition and cover fees and expenses.

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