NEW YORK — Financing of the company’s East Balt Bakeries acquisition will not materially change the debt-to-earnings ratio of Grupo Bimbo S.A.B. de C.V., said Moody’s Investors Service Inc. Over the course of the next year, Bimbo’s debt load is likely to decline to about 3 times EBITDA from about 3.5 times in September 2017, Moody’s said.
Moody’s offered the balance sheet outlook in connection with its Baa2 rating issued for $650 million of senior unsecured notes to be offered by Bimbo. Bimbo’s credit outlook is stable, the agency said.
Proceeds from the $650 million debt offering will be used to repay debt assumed for the East Balt acquisition, which closed in October, and for general corporate purposes.
The East Balt acquisition was financed through the sale of 10-year local notes and the company’s credit facility. Moody’s said it expects higher EBITDA generation to lower the debt-to-EBITDA ratio to about 3 by the end of 2018.
“The Baa2 rating is supported by Bimbo’s position as the largest baked-goods company in the world, with an ample distribution infrastructure in its key markets; sustained free cash flow generation; and ample geographic diversification,” said Alonso Sanchez, a vice-president at Moody’s. “On the other hand, the rating reflects Bimbo’s strategy to grow through acquisitions which increases its leverage and execution risk.”Moody’s said execution risk is diminished by Bimbo’s management team's strong track record integrating acquisitions and capturing synergies. Bimbo’s credit rating could be raised from Baa2 if the company were to lower its debt-to-EBITDA ratio to 2 or below on a sustainable basis, Moody’s said. Conversely, the rating could be downgraded it the ratio climbs and holds above 3.5.