S&P rates Ferrara loan B

Standard & Poor's said it assigned a preliminary B corporate credit rating to Ferrara Candy Co., a company that will be formed from the pending merger of Farley's & Sathers Candy Co. Inc. and Ferrara Pan Candy Co. Inc.

The outlook is stable.

S&P said it expects the merger to close in June 2012.

The agency also said it assigned a preliminary B rating to Ferrara's proposed $425 million senior secured term loan facility. The preliminary recovery rating is 4, indicating 30% to 50% expected recovery in a default.

The term loan will be issued at the operating company level through its Candy Intermediate Holdings Inc. subsidiary. The company also is seeking to issue a $125 million asset-based lending revolving loan facility that is unrated and due in 2017.

The agency said the company will receive about $330 million of additional equity from existing shareholders, including majority owner Catterton Partners.

S&P also said it will withdraw all existing ratings on Farley's & Sathers once the merger has closed and all outstanding debt is repaid.

The ratings reflect the company's highly leveraged financial risk profile and vulnerable business risk profile, the agency said.

The ratings also consider Ferrara's participation in the highly competitive and fragmented non-chocolate confectionary industry, limited international presence and volatility of raw material costs, S&P said.

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