Moody's upgrades Darling

Moody's Investors Service said it upgraded Darling Ingredients Inc.'s senior secured bank credit facility to Baa3 from Ba1 and senior unsecured notes to Ba2 from Ba3. Additionally, the agency raised Darling’s corporate family rating to Ba1 from Ba2 and probability of default rating to Ba1-PD from Ba2-PD. The company’s SGL-1 speculative grade liquidity rating is unchanged, but Moody’s revised the outlook to stable from positive.

“The upgrade reflects Darling's improved credit metrics with debt/EBITDA of 3x as of June 30, 2022, pro forma for the recent acquisition of Valley Proteins, Inc. and FASA Group. Darling acquired Valley Proteins in May 2022 for $1.1 billion and FASA Group in August 2022 for $543 million.

“Although Darling funded these acquisitions with cash and incremental debt which is viewed as a credit negative, Moody's believes that the addition of these two rendering companies (32 facilities in total) will help Darling expand its rendering capacity and supply more low-carbon waste fats which can be used by Diamond Green Diesel (DGD), its joint venture with Valero Energy Corp. (Baa2 Stable). On a combined basis, Moody's estimates that these two acquisitions will contribute approximately $200 million in incremental EBITDA,” the agency said in a press release.

The outlook reflects an expectation that Darling will succeed in integrating Valley Proteins and FASA, Moody’s said.

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