Moody’s downgrades Del Monte

Moody's Investors Service said it downgraded Del Monte Foods, Inc.'s corporate family rating to Caa1 from B3 and probably of default rating to Caa1-PD from B3-PD.

The agency also said it downgraded the company’s $690 million first-lien senior secured term loan due 2021 to Caa1 (LGD 4) from B3 (LGD 4) and $260 million second-lien senior secured term loan due 2021 to Caa3 (LGD 5) from Caa2 (LGD5).

The speculative grade liquidity rating also was affirmed at SGL-3.

Moody's also said it maintained a negative outlook on the company.

The downgrades reflect further deterioration in Del Monte's operating performance, the agency said.

This is due mainly to accelerated packaged fruits and vegetables category volume declines, which have offset Del Monte's share gains in canned vegetables and exacerbated its share loss in packaged fruit, Moody’s explained.

As a result, Del Monte's debt-to-EBITDA ratio will likely be higher than 9x at year-end 2017, the agency said.

The ratings reflect Del Monte's sustained high financial leverage, declining sales volume and high execution risk related to its working capital reduction plan, Moody’s said.

The ratings are supported by the strength of the Del Monte brand, which holds leading shares in core shelf stable vegetables, the agency said.

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