S&P gives B to Fiesta Purchaser, loans

S&P said it gave B ratings to Fiesta Purchaser Inc. and its planned $300 million revolver and $1.22 billion senior secured term loan. The 3 recovery rating reflects meaningful (50%-70%; rounded estimate: 50%) recovery for lenders if Fiesta defaults. The outlook is stable.

Private equity firm Clayton, Dubilier & Rice LLC agreed to buy Shearer's Foods LLC with Fiesta Intermediate Inc. becoming the parent company of Shearer's Foods. All existing debt will be repaid, and the deal is expected to close in February.

CD&R will use the term loan, $500 million of other secured debt and invest $1.2 billion common equity to acquire Shearer’s.

“We expect sales and profitability growth to enable the company to deleverage to the mid-5x area in fiscal 2024. While we expect the macroeconomic environment to remain weak, we believe the weak macroeconomic backdrop, including stretched household budgets, will continue to drive steady demand. This coupled with continuing improvements in manufacturing efficiencies, better capacity utilization, and cost reductions should improve credit metrics through fiscal 2024.

“We forecast sales growth of about 5% in fiscal 2024 and about 4% in fiscal 2025, reflecting good demand for the company's private label products and contribution from the recent acquisition of Super-Pufft USA,” S&P said in a press release.

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