Moody’s Investors Service assigned a B1 rating to a new $994 million first lien term loan executed by Hostess Holdco and subsidiaries to replace a preexisting first-lien term loan of the same amount.
The rating on the previous term loan has been withdrawn. All other Hostess ratings are unaffected. The rating outlook remains stable. The interest rate under the new term loan is 25 basis points lower than under the previous term loan. The maturity date of August 22, 2022 is unchanged from the previous term loan.
Rating assigned:
- $994 million first lien term loan due August 2022 at B1/LGD-4
Rating withdrawn:
- $994 million first lien term loan due August 2022 at B1/LGD-4
Ratings unaffected:
- Corporate Family Rating at B1
- Probability of Default Rating at B1-PD
- $100 million senior secured revolving credit facility due 2020 at B1
- The rating outlook remains stable
Hostess’ B1 Corporate Family Rating reflects its modest financial leverage (<4.5x debt/EBITDA), above-average sales growth for its peer group (approximately 6% organic), high profit margin (approximately 30% EBITDA/sales) and good liquidity and cash flow. The ratings could be downgraded if operating performance deteriorates or if the company pursues a leveraged acquisition that is likely to cause debt to EBITDA to be sustained above 5.0 times.
The rating could be upgraded if Hostess continues to successfully manage growth, maintains stable operating performance, improves earnings diversity and sustains debt to EBITDA below 4.0 times while maintaining good liquidity.