S&P rates City Brewing, facility B+

S&P said it gave City Brewing Co. LLC and its planned $950 million secured bank credit facility B+ ratings. The 3 recovery rating indicates creditors could expect meaningful (50%-70%; rounded estimate: 55%) recovery in default.

City Brewing will use the proceeds to refinance $276 million of debt, funding a $479 million dividend to Blue Ribbon Holdings LLC (BRH), purchasing brewing operations in Irwindale, Calif., for $45 million, and buying out minority shareholders for $367 million.

“The financing includes $400 million of equity from minority owners Charlesbank Capital Partners and Oaktree Capital Management and will result in pro forma leverage of 5.2x. Our ratings reflect City Brewing’s significant but not aggressive leverage (including pro forma leverage of 5.2x that should decline to 3.6x-3.8x over the next year), good market share, well-established customer relationships, and leading innovation capabilities, albeit with a small size and narrow product breadth,” S&P said in a press release.

The outlook is stable, reflecting demand trends will remain favorable, resulting in annual EBITDA growth over 40%, the agency said.

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