S&P revises FFP outlook to negative

S&P said it revised its outlook for FFP Holdings Group Inc. to negative from stable and affirmed the B- issuer and first-lien term loan ratings as well as the CCC second-lien term loan rating.

The recovery rating on the first-lien term loan is 3, indicating meaningful (50%-70%; rounded estimate: 55%) recovery in default, and the recovery rating on the second-lien term loan is 6, indicating a negligible (0%-10%; rounded estimate: 0%) recovery.

“Pro forma credit metrics will remain highly leveraged due to aggressive financial policies and weaker legacy performance. Struggles in the legacy FFP business and mix shift toward lower-margin beverage extracts and flavors underpins our estimate for approximately 500 basis points (bps) of gross margin decline and 460 bps of pro forma S&P Global Ratings-adjusted EBITDA margin contraction in fiscal 2023. As such, we expect that adjusted leverage will remain elevated in the high-8x area with EBITDA interest coverage of 1.2x,” S&P said in a press release.

The agency warned it could downgrade FFP if it finds the capital structure unsustainable.

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