Research Update: US Foods Inc.'s Proposed $800 Million Senior Secured Notes Rated 'BB'; Rating Put On CreditWatch Negative

Foodservice distributor US Foods Inc. (USF) intends to issue $800 million of senior secured notes as part of a larger financing package to fund its acquisition of Smart Foodservice and solidify its liquidity position. The company has also agreed to sell $500 million of convertible preferred equity to KKR and will use $300 million of term financing to complete the acquisition. In our view, the transaction will not have a significant impact on pro forma leverage. We expect credit metrics will deteriorate substantially in the near term due to the impact of the COVID-19 pandemic. We are affirming our 'BB' issuer credit rating on USF, our 'BB' issue-level rating on its existing senior secured term loans, and our 'BB-' issue-level

...- Foodservice distributor US Foods Inc. (USF) intends to issue $800 million of senior secured notes as part of a larger financing package to fund its acquisition of Smart Foodservice and solidify its liquidity position. The company has also agreed to sell $500 million of convertible preferred equity to KKR and will use $300 million of term financing to complete the acquisition. - In our view, the transaction will not have a significant impact on pro forma leverage. We expect credit metrics will deteriorate substantially in the near term due to the impact of the COVID-19 pandemic. - We are affirming our '##' issuer credit rating on USF, our '##' issue-level rating on its existing senior secured term loans, and our '##-' issue-level rating on its existing senior unsecured notes. - We are also assigning our '##' issue-level rating to the proposed $800 million senior secured notes and placing it on CreditWatch with negative implications. - All of our existing ratings on the company and its...

Research Update