US FOODSERVICE: S&P Junks Rating on $1 Billion Senior
Company Reporter, June 22, 2007
Standard & Poor's Ratings Services
assigned its 'B-' corporate credit rating to Columbia, Maryland-based
U.S. Foodservice. In addition, Standard & Poor's assigned
its 'CCC' rating to USF's proposed $1 billion senior unsecured toggle
notes due 2015 and proposed $550 million of subordinated debt due 2017.
The outlook is positive.
"The ratings on USF reflect its highly leveraged financial profile,
thin operating margins, and participation in the highly competitive U.S.
foodservice distribution industry, which more than outweigh favorable
industry growth trends," said Standard & Poor's credit analyst
Net proceeds from the company's senior unsecured and subordinated debt
offerings, together with proceeds from its proposed $1.565 billion term
loan, approximately $560 million of borrowings under its asset-based
revolving credit facility, $600 million under its accounts receivable
securitization program, $735 million under its collateralized
mortgage-backed facility, and about $2.25 billion of equity, will be
used to finance the acquisition of USF by Clayton, Dubilier & Rice
Inc. and Kohlberg Kravis Roberts, for a transaction value of about $7.3
billion. The $1.3 billion asset-based revolving credit
facility, $100 million revolving credit facility, $1.565 billion term
loan, and a $500 million synthetic letter of credit facility, as well as
the $700 million
accounts receivable securitization program and $735 million
collateralized mortgage-backed facility, are not rated.
Pro forma for the transaction, USF will have approximately $5.1 billion
of debt outstanding, including structured financings.
USF, through its operating subsidiary U.S. FoodService Inc, is the
second largest foodservice distributor in the U.S.