Moody's lifts Herbalife PDR to Ba1

Moody's Investors Service said it upgraded Herbalife International, Inc.'s probability of default rating to Ba1 from Ba2 and affirmed its corporate family rating, $250 million secured revolving credit facility and $200 million secured term loan at Ba1. The loss-given-default assessment on the loans was changed to LGD3, 40% from LGD2, 27%.

The outlook remains stable.

The agency said the upgrade of the probability of default rating acknowledges Herbalife's continued strong operating performance and its improved sales leader retention rate. As Herbalife's probability of default continues to decline, asset recovery rates in the event of default have become less clear to Moody's. As a result, the agency is applying its standard 50% family recovery rate to Herbalife instead of the previously used 65% rate.

The Ba1 corporate family rating reflects Herbalife's very strong credit metrics, healthy liquidity profile, conservative capital structure, significant geographic diversification and the stable sales performance of its core meal-replacement products, Moody's said.

In the agency's view, these positive attributes are offset by the company's modest scale, sales concentration in a relatively narrow product segment - meal replacement shakes and nutritional supplements - and its small market share in the broader packaged food market. The rating also acknowledges the ongoing challenges of the multi-level selling model.

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