Moody's rates Beverages & More note Caa1

Moody's Investors Service said it assigned B3 corporate family and probability-of-default ratings to Beverages & More!, Inc. and a Caa1 rating with a loss-given-default assessment of LGD4 (62%) to its proposed $100 million senior secured notes.

The outlook is stable.

The company has agreed to be acquired by TowerBrook Capital Partners, LP in a transaction valued at $205 million. The acquisition will be financed with the proceeds of the proposed $100 million notes, $113 million of (unrated) preferred stock being held by TowerBrook and management and a common equity contribution by TowerBrook and management. The transaction value represents a multiple of roughly 9.7 times reported EBITDA for the fiscal year ended Jan. 28.

The agency said the B3 corporate family rating is constrained by post-transaction credit metrics that will be very weak, particularly the very high debt-to-EBITDA ratio of 8.2x and limited levels of operating cash flow that are expected to be generated over the next several years, and by the company's high seasonality, small scale, slim operating margins and aggressive financial policies.

Moody's noted, however, that while the company participates in a very fragmented and highly competitive alcoholic beverage retail market, its ratings are supported by its strong and well-established position within the markets in which it competes.

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