S&P prunes Walnut Sycamore

S&P said it lowered its ratings on Walnut Sycamore Holdings LLC (Wayne Sanderson Farms) to BB- from BB and its senior secured credit facilities to BB from BB+. The recovery rating remains 2, indicating substantial recovery (rounded estimate: 70%) in default.

“The downgrade reflects WSF's sharp profit decline and significant credit measure deterioration resulting from the extraordinarily challenging operating conditions in the poultry industry. WSF's EBITDA margins have declined well over 20% since last summer (before the merger closed), when industry supply constraints and healthy consumer demand supported strong chicken prices. The company's EBITDA margins turned negative in the second half of fiscal 2023 (ended March) after chicken prices dropped significantly since the summer of 2022 while input costs (particularly chicken feed) remained very high,” S&P said in a statement.

The agency said it sees “signals conditions could improve in fiscal 2025.”

The outlook is negative.

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