S&P trims Milk Specialties

Standard & Poor’s said it lowered its corporate credit rating on Milk Specialties Co. to B- from B and placed the rating on CreditWatch with negative implications.

At the same time, S&P lowered the issue-level rating on Milk Specialties’ senior secured debt to B- from B and placed this rating on CreditWatch with negative implications. The recovery rating remains 3, indicating that lenders could expect a meaningful (50% to 70%) recovery in the event of a payment default.

“The downgrade of Milk Specialties reflects its persistent operating underperformance, declining profitability, and deteriorating credit measures over the last 18 months, resulting in a diminished business risk profile and leverage rising to over 5x from less than 4x,” said S&P credit analyst Jeff Burian in a news release.

“The CreditWatch placement reflects the company’s technical default under its credit agreement, liquidity constraints related to revolver availability, and ongoing minimal covenant cushion.”

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