U.S.-based The Chefs' Warehouse Inc. reported improved profitability and a good second quarter result benefiting from organic growth and bolstered through acquisition activity. We believe the company will sustain its improved credit measures and free operating cash flow (FOCF) prospects will likely improve next year notwithstanding weakening macroeconomic prospects and an inflationary environment. We raised our issuer credit rating to 'B' from 'B-'. The outlook is positive. We assigned a 'B+' issue-level rating to the proposed upsized and extended $250 million term loan due 2029, reflecting a recovery rating of '2' (70-90% recovery; rounded estimate: 85%). The positive outlook reflects potential for an upgrade if the company can sustain momentum, free cash flow generation prospects improve, and it demonstrates a
