S&P nicks H-Food Holdings

S&P said it lowered its ratings on H-Food Holdings LLC (Hearthside Foods Solutions LLC) and its $202.5 million revolving credit facility and $2.02 billion first-lien term loan ($1.98 billion outstanding) to CCC from CCC+. The agency also cut the issue-level rating on the company's $350 million of senior unsecured notes to CC from CCC-. The recovery ratings on the debt remain 3 and 6, respectively.

Hearthside reported weaker-than-expected third-quarter results and S&P warned it does not expect any real improvement over the next few quarters. Its revolver became current on Nov. 23 and is due Nov. 23, 2024, and its term loan becomes current in May with a maturity of May 2025.

“We believe the company's capital structure is unsustainable and will remain that way absent a significantly favorable improvement in operating performance. Hearthside's cash balances declined to $73 million at the end of the third quarter of fiscal 2023 from $178 million during the same period the previous year due to weak operating performance.

“While the company strengthened its liquidity by about $279 million with proceeds from a divestiture of its European operations and a sale-leaseback transaction on two of its owned facilities in October, we believe a near-term liquidity shortfall is possible,” S&P said in a press release.

The outlook remains negative.

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