S&P downgrades Flavors

S&P said it lowered the corporate credit rating on Flavors Holdings Inc. to B- from B.

The outlook is negative.

The agency also said it lowered the ratings on the company's $50 million senior secured revolving credit facility due 2019 and $350 million senior secured first-lien term loan due 2020 to B- from B+.

The agency also said it revised the recovery ratings to 3, indicating 50% to 70% expected default recovery, from 2.

S&P also said it lowered the rating on the company's $50 million senior secured second-lien term loan due 2021 to CCC+ from B.

The agency also said it revised the recovery rating to 5, indicating 10% to 30% expected default recovery, from 4.

The downgrades reflect the company’s weak financial flexibility and an estimation that the company will not meet its first-lien net leverage covenant when it steps down to 5x in the first quarter of 2017, S&P said.

The agency also said it expects the company’s external liquidity sources to tighten as the company borrows more than $40 million under its $50 million committed revolving credit facility in 2016 to invest in branding efforts for its stevia-based sweetener product, Whole Earth.

These factors make it imperative that the company execute on its strategy to grow its sweetener business, a strategy it has not been successful at in the past, S&P added.

If it does not, the company will have trouble repaying the borrowings under the revolving credit facility, leading to continued constrained liquidity, the agency said.

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