NEW YORK — Standard & Poor’s Ratings Services on March 25 raised its corporate credit rating on Kansas City-based Hostess Holdco L.L.C. to “B” from “B-“. The outlook is stable.
The ratings agency also raised its issue-level rating on Hostess’ $500 million first lien term loan due April 2020 to “B+” from “B-“. Additionally, Standard & Poor’s revised the recovery rating to “2”, indicating the agency’s belief that lenders could expect substantial (70% to 90%) recovery, in the higher end of the range, in the event of payment default or bankruptcy, from “3”.
“The revised issue-level and recovery ratings reflect our view that the company’s enterprise value at emergence from a potential bankruptcy has improved with Hostess’ improved profitability and cash flow generation,” Standard & Poor’s said.
“The one-notch upgrade to the corporate credit rating reflects Hostess’ successful execution of its re-launch of the snack cake business and substantially improved profitability,” said Brian J. Moriarty, credit analyst with Standard & Poor’s.
The rating’s agency pointed out that Hostess now is focused on growing its sales base through new products and continued expansion into channels where it historically has not maintained a significant presence, such as dollar stores and vending.“Since the re-launch of the business in July 2013, the company has re-established its brands and regained good market share,” Standard & Poor’s said. “However, its market share is still below pre-bankruptcy levels: Hostess has the No. 2 position in U.S. sweet baked goods, behind McKee Foods Corp. Although Hostess has expanded its customer base and increased its product offerings, we expect it will continue to work on regaining market share.”