Moody’s drops Deoleo, loans

Moody's Investors Service said it downgraded Deoleo SA’s corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD, €460 million first-lien term loan and €85 million first-lien revolving credit facility to B3 from B2 and €55 million second-lien term loan to Caa2 from Caa1.

The outlook remains stable.

Moody’s said the action reflects its expectation that Deoleo's credit metrics will no longer remain commensurate with a B2 corporate family rating for an extended period of time as the agency anticipates the company's Moody's-adjusted debt/EBITDA could reach 11 times by year-end 2015 compared to 6.9 times at year-end 2014, which exceeds the indicated level for potential downgrade pressure on the B2 corporate family rating.

The increase in leverage is due to deteriorating operating performance resulting from margin pressure due to the significant price increases of extra virgin olive oil registered in the last 12 months, the agency said. Although the ratings incorporate the inherent volatility in olive oil markets, the price increase experienced in 2014/2015 was unprecedented and above Moody's own conservative assumptions.

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