Moody's downgrades CTI Foods

Moody's Investors Service said it downgraded CTI Foods Holding Co., LLC's corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD, $345 million first-lien term loan due 2020 to B3 (LGD4) from B2 (LGD3) and $140 million second-lien term loan due 2021 to Caa2 (LGD6) from Caa1 (LGD6). The outlook remains stable.

The agency said the downgrade primarily reflects the company's weakened credit metrics and Moody’s belief they no longer support a B2 corporate family rating. The company's leverage, as measured by Moody's adjusted debt-to-EBITDA, has been above 6 times since the May 2013 leveraged buyout of the company and has recently increased as a result of margin deterioration over the last year.

The B3 corporate family rating reflects CTI's relatively weak credit metrics as well as margin deterioration and negative free cash flow generation over the last year, the agency said.

At the same time, Moody's recognizes the company's increasing size and scale as well as its improving customer and product diversification over time.

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