S&P upgrades North Atlantic Trading

S&P said it raised the corporate credit rating on North Atlantic Trading Co. Inc. to B from B-.

The agency also said it raised the ratings on the company’s first-lien debt to BB- from B and second-lien debt to CCC+ from CCC.

S&P also said it revised the recovery rating on the first-lien debt to 1 from 2, indicating 90% to 100% expected default recovery.

The recovery rating on the second-lien debt remains at 6, indicating 0 to 10% expected default recovery.

The outlook is stable.

The ratings reflect meaningful credit ratio improvement at the company after repaying about $20 million in second-lien debt and paying off or converting to common equity its parent company’s shareholder notes in connection with the initial public offering, the agency said.

Pro forma for the debt repayment and conversion, S&P said it estimates leverage to be in the mid-4x range.

While the agency said it still views the company as financial sponsor-controlled, it will maintain a slightly less aggressive policy going forward and will continue to prepay debt with excess cash flow.

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