Research Update: KeHE Distributors Holdings LLC Outlook Revised To Negative On Elevated Leverage, Ratings Affirmed

Illinois-based organic and specialty foods distributor KeHE Distributors Holdings LLC (KeHE) plans to issue $200 million of fungible add-on senior secured notes to partially repay the outstanding borrowings under its existing asset-based lending (ABL) facility. We expect KeHE to use the availability under its ABL facility early next fiscal year (beginning May 2025) to fund its potential purchase of TowerBrook's remaining ownership stake, which may happen, at earliest, in the first quarter. As a result, we expect leverage will rise to more than 6.0x. Therefore, we revised our outlook on the company to negative from stable and affirmed all of our existing ratings, including our 'B+' issuer credit rating. The negative outlook reflects our expectation that KeHE's S&P Global Ratings-adjusted

...- Illinois-based organic and specialty foods distributor KeHE Distributors Holdings LLC (KeHE) plans to issue $200 million of fungible add-on senior secured notes to partially repay the outstanding borrowings under its existing asset-based lending (ABL) facility. - We expect KeHE to use the availability under its ABL facility early next fiscal year (beginning May 2025) to fund its potential purchase of TowerBrook's remaining ownership stake, which may happen, at earliest, in the first quarter. As a result, we expect leverage will rise to more than 6.0x. - Therefore, we revised our outlook on the company to negative from stable and affirmed all of our existing ratings, including our 'B+' issuer credit rating. - The negative outlook reflects our expectation that KeHE's S&P Global Ratings-adjusted debt to EBITDA will remain above 5.5x over the next 12 months (peaking at 6.2x) while it maintains S&P Global Ratings-adjusted EBITDA margins in the low-4% area....

Research Update