Blue Ribbon Intermediate Holdings LLC Outlook Revised To Negative From Ratings Affirmed

Stocks and Financial Services Press Releases Tuesday June 27, 2017 09:42
NEW YORK--27 Jun--S&P Global Ratings

NEW YORK (S&P Global Ratings) June 26, 2017--S&P Global Ratings today revised its outlook on Blue Ribbon Intermediate Holdings LLC to negative from stable. We also affirmed our 'B' corporate credit rating as well as the 'B' issue-level rating and '3' recovery rating on the company's first-lien facility, which consists of a $95 million revolver due November 2019 and $495 million first-lien term loan due November 2021.

The outlook revision to negative reflects lower projected EBITDA for fiscal year 2017 and higher-than-expected debt levels driven by a recent upsize to Blue Ribbon's first-lien facility and weaker cash flows, which should cause leverage in 2017 to remain well above our previous projections. This outlook revision follows a weaker–than-expected 2016, when significant volume underperformance within its craft segment and higher marketing and selling expenses related to its "hard soda" offerings caused adjusted EBITDA to decline roughly 34% from the previous year and for debt to EBITDA to rise to roughly 8.7x, well above our forecast. While we forecast that restructuring efforts to reduce selling, general, and administration (SG&A) expenses, providing uplift to EBITDA in 2017; its core brands to continue to maintain share; and debt to EBITDA to improve below 8x,continued underperformance in its craft segment will pressure credit metrics through 2017.

The negative outlook reflects the risk that the company can't achieve and maintain debt to EBITDA below 8x due to continued underperformance of its craft portfolio and the resulting impact on operating performance and cash flow in excess of our forecast.

We could lower the ratings if the company can't implement cost reductions or continue to execute and maintain share within its core brands, causing EBITDA margins to erode by 100 basis points and result in debt to EBITDA remaining above 8x with no prospects for improvement over the next 12 months.

We could revise our outlook to stable if we are comfortable that the effect of the declining craft portfolio is line with our expectations and the company will reduce its cost structure in line with our forecast, resulting in debt to EBITDA below 8x on a sustained basis.

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