Moody's boosts Alphia

Moody's Investors Service said it upgraded Alphia, Inc.'s first-lien credit facility to B2 from B3. The first-lien credit facility consists of a $40 million revolver expiring in March 2025 and a $285 million first-lien term loan due March 2026. The agency also raised Alphia’s corporate family rating to B2 from B3 and its probability of default rating to B2-PD from B3-PD.

“The upgrades reflect Moody's view that Alphia will sustain the higher earnings level and stronger credit metrics achieved over the last year and that operating cash flow will continue to improve. Good consumer demand for pet food combined with the company's initiatives to improve margins are contributing to stronger earnings. The company has expanded the EBITDA margin by about 200 basis points over the last 12 months through a combination of favorable contracting and pricing initiatives, moderating commodity costs, realization of operating efficiencies such as leveraging purchasing power with suppliers and installing equipment to reduce waste, strong customer demand and tight capacity in the contract manufacturing pet food space.

“The company has also overcome significant problems with the initial rollout of a new enterprise resource planning (ERP) system and is now realizing operating efficiency benefits from the technology upgrade. As a result, Alphia's debt/EBITDA leverage (on a Moody's adjusted basis) improved to below 3x for the 12 months ended March 2023, down from about 3.5x in fiscal 2022,” the agency said in a press release.

The outlook is stable.

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