Agrilink Foods Rtg Afrmd, Off Watch; New Rtgs Assigned.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 11/3/98-- Standard & Poor's today affirmed its double-'B'-minus corporate credit rating for Agrilink Food Inc. and removed it from CreditWatch, where it was placed in August 1998. In addition, Standard & Poor's assigned its single-'B' rating to the cooperative's proposed $200 million senior subordinated notes due 2008, and its double-'B'-minus bank loan rating to Agrilink's new $655 million credit facility. The outlook is negative. The affirmation reflects expectations that Agrilink's purchase of Dean Food Inc.'s frozen vegetable unit in a debt-financed acquisition valued at about $470 million could strengthen its business position by creating a leading processor of frozen vegetables Frozen vegatables (also freeze-dried vegetables) are commercially packaged vegetables that are sold in the frozen section of the store, usually packaged in either rectangular boxes or plastic bags. . The acquisition should enhance the cooperative's strong regional brands and, via the acquired Birds Eye
Incremental cost is additional or increased cost of an item or service apart from its actual cost. debt associated with the acquisition will limit the cooperatives financial flexibility going forward. Pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. before interest, taxes, depreciation, and amortization (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) coverage of interest for the year ended June 1998 will be a thin 2.2 times (x), with total debt to EBITDA at 4.9x. Still, light debt amortization, modest capital needs, and flexibility afforded from Agrilink's membership-base through its parent, ProFac, a member owned cooperative, provide resources to offset a moderate operating misstep. The bank facility is rated double-'B'-minus, the same as the corporate credit rating. Although the facility is secured by substantially all of the company's assets, it is expected that the collateral security COLLATERAL SECURITY, contracts. A separate obligation attached to another contract, to guaranty its performance. By this term is also meant the transfer of property or of other contracts to insure the performance of a principal engagement. could experience erosion of value in a default or workout scenario. It is not clear how much benefit, if any, derives from security. Lenders may fare little better than the company's unsecured creditors Unsecured Creditor An individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because they have nothing to fall back on should the borrower default on the loan. A debenture holder is an unsecured creditor. . OUTLOOK: NEGATIVE Should Agrilink's EBITDA coverage of interest fail to exceed 2.2x in fiscal 1999, the ratings could be lowered.---CreditWire |
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