Bumble Bee credit outlook changed to negative

by Josh Sosland
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NEW YORK — The credit outlook for Bumble Bee Holdings, Inc. has been changed to negative from stable by Moody’s Investors Service. The ratings agency left the corporate rating of the nation’s largest seafood producer and marketer at B2.

Moody’s said the outlook revision was prompted by the rising cost of fish and other commodity inputs and decreasing consumption “by price sensitive U.S. consumers.” The agency said the combination could hurt Bumble Bee results over the next 12 to 18 months.

Bumble Bee has $565 million of 9% senior secured notes with a 2017 maturity with the B2 rating. The company also has $150 million in senior unsecured notes due in 2018 with a Caa1 rating. A B2 rating is considered “speculative” by Moody’s with high credit risk. Caa rated bonds have “poor standing” and are subject to very high credit risk.

Moody’s acknowledged steps Bumble Bee has taken to pass along cost increases, even at the expense of lower volume but said the company is more vulnerable because of its high leverage.

“If demand continues to weaken in response to these and potentially additional price increases, Bumble Bee's operating performance will likely remain under pressure,” Moody’s said. “In the context of this evolving operating environment, Moody’s views Bumble Bee's debt-to-EBITDA of 6.7x at December 31, 2011 as high for the current ratings.”

Offering positives and negatives factored into the ratings, Moody’s said that besides being highly leveraged, Bumble Bee operates in a commodity-like category and lacks diversification. On the plus side, the company has a “top-tier” position in the seafood category, has maintained margins during difficult periods in the past and should benefit from “low cost global sourcing capabilities and its focus on cost cutting initiatives,” Moody’s said.

The agency said the ratings could be downgraded if Bumble Bee’s debt-to-EBITDA ratio to does not “trend permanently below 6.0x” over the next 12 to 18 months.

Based in San Diego, Bumble Bee has been owned by Lion Capital since December 2010. Revenues in 2011 were $965 million.

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