Moody's rates Harmony Foods notes B3

Moody's Investors Service said it assigned a first-time B3 corporate family rating to GSH Holdings, the parent company of Harmony Foods Corp., and an instrument rating of B3 (LGD3, 46%) to up to $115 million of proposed senior secured notes currently being offered by Harmony Foods.

The outlook is stable.

The proceeds from the note offering will be used primarily to retire a $41 million existing credit facility, fund a $65 million cash distribution to the equity sponsor Levine Leichtman Capital Partners and related parties and pay $8.5 million in fees and expenses.

The ratings reflect the company's small size at about $85 million in run-rate revenues, relatively high financial leverage of approximately 5 times EBITDA, narrow product lines and its private equity ownership that typically represents decapitalization risk, the agency said.

The ratings are supported by the company's strong market shares in the growing confection-based soft-chew nutraceuticals category, organic annual sales growth rate in excess of 20%, high operating margins and attractive industry growth trends, the agency added.

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