Moody's rates TreeHouse notes Ba2

Moody's Investors Service said it assigned TreeHouse Foods, Inc. Ba2 corporate family and probability-of-default ratings and an SGL-2 speculative grade rating and a Ba2 (LGD4, 53%) to its $400 million of eight-year senior unsecured notes.

The outlook is stable.

Proceeds will be used to fund part of the pending $660 million acquisition of Sturm Foods, Inc.

The Ba2 rating is based on the company's leading position in private label food and beverage categories, favorable industry growth trends and a disciplined, but active, acquisition strategy that has caused periodic spikes in financial leverage, according to the agency.

The rating also considers TreeHouse's relatively small scale, the highly competitive nature of the private label foods business, modest integration risk and the company's willingness to use equity to fund a material portion of the acquisition, the agency said.

Proforma fiscal 2009 leverage, based on adjustments, is about 4.1 times EBITDA, which is within the typical range for the Ba rating category, the agency said.

TreeHouse should generate sufficient cash flow to reduce debt to below 3.5 times EBITDA within 12 months and below 3 times within 24 months, the agency noted.

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