Moody's lifts Pinnacle Foods, gives notes B3, loan Ba3

Moody's Investors Service said it upgraded the corporate family and probability of default ratings of Pinnacle Foods Finance, LLC to B2 from B3 and assigned a rating of B3 to $400 million of senior unsecured notes and a rating of Ba3 to about $442 million of senior secured bank debt.

The outlook is stable.

Concurrent with the notes offering, Pinnacle plans to enter into a new senior secured bank term loan D, the agency said, adding that the proceeds from both debt instruments will be used to retire its existing $842 million term loan C in its entirety, after which Moody's will withdraw the rating on this debt tranche.

The upgrade of the corporate family rating to B2 reflects Moody's belief that Pinnacle's execution of the Birds Eye integration will remain reasonably close to plan, and that in spite of intensifying promotional pricing pressures in some key product segments, including frozen vegetables and baking mixes, Pinnacle will be able to partially offset gross margin pressure with ongoing cost reductions and by exiting lower-margin businesses, the agency said.

As a result, the agency said it expects that Pinnacle should be able to generate stable earnings generation and free cash flow that will sustain debt/EBITDA below 6.5 times within six to 12 months.

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