S&P lowers Dean Foods

S&P said it lowered the corporate credit rating on Dean Foods Co. to BB- from BB.

The outlook is stable.

The agency also said it lowered the rating on its $450 million revolving facility to BB+ from BBB-.

The recovery rating remains at 1, indicating 90% to 100% expected default recovery.

S&P also said it lowered the rating on the $700 million unsecured notes to BB- from BB. The recovery rating remains at 3, indicating 50% to 70% expected default recovery.

As of Sept. 30, Dean Foods had about $946.5 million reported debt outstanding.

The downgrades reflect Dean Foods accelerating volume declines, which have resulted from ongoing negative consumption trends in fluid milk, as well as increased promotional pricing pressure from grocers resulting in lower fixed-cost absorption, S&P said.

This has caused adjusted debt-to-EBITDA to rise to 3.3x as of Sept. 30, the agency said.

Moreover, S&P said it believes these industry dynamics will persist into 2018, making it unlikely the company will be able to reduce leverage to prior expectations for the BB rating despite the likelihood of the company accelerating cost-cutting to right size its cost base.

The competitive landscape for many of its consumers also is pressuring pricing and margins, the agency added.

The stable outlook reflects an expectation Dean Foods will continue to implement necessary cost cutting measures to combat continued fluid milk volume declines, Moody's said.

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