Moody's to review Dean Foods ratings
December 23, 2009
by Eric Schroeder
NEW YORK — Moody’s Investors Service on Dec. 22 placed the ratings — including the B1 corporate family rating — of Dallas-based Dean Foods Co. on review for possible upgrade. Moody’s said the review follows a period of improving credit metrics, liquidity and cash flows due both to improved operating performance and measures taken over past months to improve the capital structure, including the issuance of approximately $450 million in new equity earlier this year.
According to Moody’s, the review will focus “on the likely stability of the improved credit metrics, the impact of rising milk prices on the future results of the company, and the company’s business and financial strategies, including its commitment to maintaining lower leverage.”
In addition to putting the ratings on review for possible upgrade, Moody’s affirmed Dean Foods’ SGL-2. Issuers rated SGL-2 possess good liquidity and are likely to meet obligations over the coming 12 months through internal resources but may rely on external sources of committed financing.
In the case of Dean Foods, Moody’s said the affirmation of the speculative grade liquidity rating reflects the company’s solid liquidity profile, with sufficient internal cash flow generation to cover basic cash needs, including working capital, term loan amortization and capital expenditures, over the next 12 months and sufficient revolver and receivables facility availability to cover peak short-term needs.
“We expect the company to maintain ample cushion on its covenants,” Moody’s said.