Moody’s cuts Iceland Foods PDR; rates notes B2

Moody's Investors Service said it affirmed the B2 corporate family rating of Iceland VLNCo Ltd. (Iceland Foods) as well as the B2 rating on the existing £170.2 million outstanding senior secured fixed-rate notes due 2024 issued by Iceland Bondco plc.

Concurrently, the agency assigned B2 ratings to the new £430 million senior secured fixed-rate notes due 2025 and the new £200 million senior secured fixed-rate notes due 2027 to be issued by Iceland Bondco.

Lastly, Moody’s downgraded Iceland Foods' probability of default rating to B2-PD from B1-PD.

The outlook on all ratings remains stable.

Net proceeds from the new notes will be used to redeem the existing £271 million outstanding senior secured floating-rate notes due 2020 and £357 million outstanding senior secured notes due 2021. Upon completion of the transaction, the agency will withdraw the B2 ratings on these instruments.

Moody’s said the action reflects its view that Iceland Foods' corporate family rating is solidly positioned at B2 following improved credit metrics in the last 12 months due to good operating performance and voluntary debt prepayments.

The alignment of the probability of default rating at the same level as the corporate family rating reflects Moody's assumption of a 50% recovery rate in its Loss Given Default for Speculative-Grade Companies methodology, which is customary for capital structures comprising senior secured notes.

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