Moody’s Investors Service (“Moody’s”) has upgraded ratings of CSM Bakery Solutions Limited (“CSM”), including the Corporate Family Rating to Caa2 from Caa3, and the Probability of Default rating to Caa2-PD from Ca-PD. Moody’s also has assigned ratings to CSM Bakery Solutions LLC’s amended and extended secured credit facilities, including a Caa1 rating to its $448 million first lien term loan and a Caa3 rating to its $210 million second lien-term loan. Finally, Moody’s revised the outlook to stable from negative.
The rating upgrades reflect the recent successful completion of a recapitalization, including debt maturity extensions up to 18 months along with a E50 million cash equity contribution from the sponsor. The transaction reduced financial leverage and enhanced liquidity through repayment of revolver borrowings, adding cash to the balance sheet and extending maturities. This has provided the company a modest window to reduce financial leverage through an operational turnaround or other possible actions such as asset sales.
Moody’s cautions that financial leverage will remain high and liquidity could deteriorate over time as the extended maturities draw closer. Additionally, the company’s ability to generate positive free cash flow will be challenged over the next year by significantly higher financing costs associated with the refinancing and business disruptions and slowdowns caused by the coronavirus pandemic. Cash interest expense could potentially decrease modestly if the company elects to pay a higher interest rate on the second lien term loan along with 90% pay-in-kind interest. However, debt accretion on the second-lien term loan through the PIK feature would likely exceed free cash flow, resulting in higher total debt.
To read the rest of the story, please go to: Moody’s
