Research Update: KeHE Distributors Holdings LLC 'B+' Rating Affirmed On Partial Sponsor Buyout; Outlook Stable; New Notes Rated 'B'

Illinois-based organic and specialty foods distributor KeHE Distributors Holdings LLC (KeHE) plans to issue $750 million of senior secured notes to refinance its existing notes, partially repay the outstanding balance on its existing asset-based lending (ABL) facility, and repurchase minority holder TowerBrook's preferred equity and most of its common equity stake in the company. We expect KeHE's S&P Global Ratings-adjusted leverage to be about 5.9x (excluding synergies) at the close of the transaction and decline to 5.2x by the end of the fiscal year ending April 2024, before falling further to 4.3x at the end of fiscal 2025. Therefore, we affirmed our 'B+' issuer credit rating on KeHE. We also assigned a 'B' issue-level and '5' recovery rating to the

...- Illinois-based organic and specialty foods distributor KeHE Distributors Holdings LLC (KeHE) plans to issue $750 million of senior secured notes to refinance its existing notes, partially repay the outstanding balance on its existing asset-based lending (ABL) facility, and repurchase minority holder TowerBrook's preferred equity and most of its common equity stake in the company. - We expect KeHE's S&P Global Ratings-adjusted leverage to be about 5.9x (excluding synergies) at the close of the transaction and decline to 5.2x by the end of the fiscal year ending April 2024, before falling further to 4.3x at the end of fiscal 2025. - Therefore, we affirmed our 'B+' issuer credit rating on KeHE. - We also assigned a 'B' issue-level and '5' recovery rating to the company's proposed notes. The '5' recovery rating indicates our expectation for modest (10%-30%; rounded estimate: 15%) recovery in the event of a payment default. - We have assigned a new Management & Governance (M&G) assessment...

Research Update