Moody's rates Phillips loans B1, Caa1

Moody's Investors Service said it assigned a B2 corporate family rating and a B2-PD probability of default rating to PFS Holding Corp., the holding company for Phillips Pet Food and Supplies. The agency also assigned a B1 (LGD3, 42%) rating to the company's new $260 million senior secured first-lien term loan due 2021 and a Caa1 (LGD5, 87%) rating to the new $130 million senior secured second-lien term loan due 2022. The outlook is stable.

Proceeds from the term loans are being used to finance Thomas H. Lee Partners' acquisition of the company from its previous financial sponsor, AEA.

The agency said the company's B2 corporate family rating reflects its highly leveraged capital structure, narrow margins and aggressive growth via acquisitions.

In Moody's view, these factors are partially offset by the company's national distribution platform as the largest pet food and supply distributor in the United States and good customer and vendor diversity. The rating also reflects the benefit of good growth prospects for the pet product industry overall, and the company's liquidity is very good, the agency said.

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