Printer Friendly

Rykoff-Sexton Rtgs Afrmd After JP Foodservice Merger Anncmnt.

NEW YORK--(BUSINESS WIRE)--June 30, 1997--NY--Standard & Poor's CreditWire 6/30/97--Standard & Poor's today has affirmed its double-'B'-minus corporate credit and senior debt ratings, as well as its single-'B' subordinated debt rating of Rykoff-Sexton Inc.

The affirmations follow the company's announcement of a definitive agreement under which JP Foodservice and Rykoff will merge through an exchange of stock. Rykoff shareholders will receive JP Foodservice shares, and JP Foodservice will assume approximately $700 million of Rykoff debt. All operating units of the combined business will be renamed as U.S. Foodservice.

The ratings outlook is stable.

Rykoff-Sexton had about $507 million of total debt (excluding off balance sheet receivables financing) outstanding at March 29, 1997.

This merger announcement follows the 1996 merger with U.S. Foodservice Inc. Pro forma for JP Foodservice, the newly combined entity will be the second-largest U.S. foodservice distribution company, encompassing more than 85% of the U.S. population, with annual sales of $5.2 billion. Ratings continue to reflect some operating risk associated with integrating JP Foodservice on the heels of a substantial 1996 merger, higher debt levels from the 1996 merger, and limited debt capacity within the existing rating category over the near term. However, the JP Foodservice merger provides even greater geographic breadth and access to many major U.S. markets in the growing, but highly fragmented, food service distribution industry.

Rykoff-Sexton's operating margins are expected to continue to improve as a result of anticipated cost savings from the JP Foodservice merger, following the realization of $15 million of annual cost savings from the 1996 U.S. Foodservice merger. Pro forma for the merger, the combined entity will be somewhat highly leveraged, and coverage measures will continue to be thin. Standard & Poor's estimates pro forma lease-adjusted total debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) will be in the 4.5 times (x)-5.0x range (including receivables), and pro forma lease-adjusted EBITDA to interest coverage to be in the mid-to-high 2x range. Although the newly combined entity is expected to be acquisitive, Standard & Poor's does not anticipate any material change in leverage to support future acquisitions.

OUTLOOK: Stable.

Standard & Poor's expects that anticipated operating margin improvements and other financial measures, along with management's financial policies, will remain appropriate for the current rating category. -- CreditWire

CONTACT: Nicole Delz Lynch, 212-208-1970
COPYRIGHT 1997 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1997, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

 
Article Details
Printer friendly Cite/link Email Feedback
Publication:Business Wire
Date:Jun 30, 1997
Words:389
Previous Article:Alliance Pharmaceutical Corp. announces milestone payment and modification of LiquiVent agreement.
Next Article:Cordex Petroleums Inc. signs a shareholders agreement with Chilgener.

Terms of use | Privacy policy | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters