Moody’s drops Flavors, revolver, loans

Moody's Investors Service said it downgraded Flavors Holdings Inc.’s corporate family rating to B3 from B2 and probability of default rating to B3-PD from B2-PD.

The agency also downgraded the first-lien revolving credit facility rating to B3 from B2, the first-lien term loan rating to B3 from B2, and the second-lien term loan rating to Caa2 from Caa1.

The outlook is stable.

Moody’s said the downgrade reflects its concern about Flavors' declining liquidity given a backdrop of historical revenue declines as well as high turnover in its senior management ranks over the last few years.

The agency expects that revolver availability plus cash on hand will approach a low point of $10 million by year end as the company continues to fund the launch of its new line of stevia-based sweetener products. Moody's is cautious regarding the growth prospects of the company's new sweetener products because initial growth plans for its stevia products at the time of the Merisant acquisition (October 2014) did not come to fruition.

Despite Starbucks Corp.'s (A2 stable) Sept. 6 announcement that it will carry Flavors’ new natural sweetener product, it is still too early to tell if the company has created a flavor profile with this new line of products that appeals to consumers at a price they are willing to pay, the agency explained.

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