S&P assigns B ratings to Arnott’s loans

S&P said it assigned its B issuer credit rating to Snacking Investments BidCo Pty Ltd. (Arnott’s) and the company’s $400 million and A$485 million term loan issuance, A$90 million delayed-draw term loan credit facility and A$150 million revolver.

Following the completion of the sale and leaseback transactions of manufacturing properties, S&P assigned assigned recovery ratings of 3 to these secured debt facilities, reflecting meaningful (50%-70%; rounded estimate: 55%) recovery prospects in a payment default. The preliminary assessment was 4, which meant an expectation of average recovery (30%-50%) in the event of a payment default.

“The rating on Arnott’s reflects the company’s highly leveraged balance sheet, which leaves it with limited headroom for underperformance or ability to defend against competitors. We expect minimal deleveraging over the next two years while Arnott’s implements its strategic initiatives,” said S&P in a press release.

The agency said the S&P Global Ratings-adjusted leverage is likely to remain above the 7x range over this period. “We expect EBITDA interest coverage to improve toward 2x over this period, which will likely be driven by an improvement in profitability and growth in EBITDA,” S&P said.

The outlook on Arnott’s is stable.

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