Moody's rates Fort Dearborn loans B1

Moody's Investors Service said it assigned B1 (LGD3, 42%) ratings Fort Dearborn Co.'s proposed $25 million first-lien senior secured revolver and $150 million first-lien senior secured term loan B and affirmed the corporate family and probability-of-default ratings at B2.

The outlook is stable.

On May 31, Fort Dearborn announced it acquired substantially all of the operating assets and assumed certain liabilities of Renaissance Mark Holdings Corp. for an undisclosed sum. The company will use the $150 million first-lien term loan B and a $6 million seller note to fund the acquisition, to repay existing bank debt and to cover fees and expenses. The $25 million revolver is expected to be undrawn and fully available at closing.

In affirming the B2 corporate family rating, the agency said it gave significant consideration to the improved business profile expected from combining the leading suppliers of cut and stack labels. Pro forma for the acquisition, the company will be the second-largest player in the highly fragmented domestic label market based on sales, with the cut and stack segment accounting for around 84% of total revenues. The transaction also gives Fort Dearborn entry into the higher-margin spirits and wine segment and will provide better customer diversification.

However, Fort Dearborn's small size remains a limiting factor, Moody's said, with pro forma 2006 revenue of about $307 million. The anticipated financial metrics are also burdened by a heavy reliance on achieving significant synergies.

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