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Investing.com -- Moody’s Ratings has adjusted its outlook for B&G Foods (NYSE:BGS), Inc. from positive to negative, citing weaker than expected operating performance and a rise in debt-to-EBITDA leverage. Moody’s affirmed B&G’s B3 Corporate Family Rating (CFR) and B3-PD Probability of Default Rating on June 3, 2025. However, the ratings on the existing senior secured first lien debt, which includes the revolving credit facility, term loan, and secured notes, were downgraded to B2 from B1. The Caa2 rating on the existing senior unsecured notes was affirmed, and the speculative grade liquidity rating remains at SGL-3.
Moody’s adjustment reflects the rise in debt-to-EBITDA leverage to 7.3x for the last twelve months ending March 29, 2025. Moody’s anticipates that leverage will remain above 7x for the next 12–18 months due to a challenging operating environment. B&G’s organic sales fell by about 11% in 1Q25, primarily due to consumer pressure, retailer inventory destocking at the start of the year, the shift in Easter timing, and increased promotional activity, especially in the Green Giant business.
B&G’s SGL-3 speculative grade liquidity rating indicates Moody’s expectation that the company will maintain adequate liquidity over the next 12 months. This is supported by $61 million in cash as of March 29, 2025, and access to its $475 million revolving credit facility. However, covenant constraints limit revolver availability to an estimated $50-60 million. Moody’s projects free cash flow (after dividends) of approximately $40 million in 2025 and $25–$35 million in 2026, which is enough to cover the $4.5 million annual amortization on the term loan.
The company’s cushion under both its 1.75x minimum interest coverage and 7.00x maximum net leverage covenants was less than 0.25x as of March 29, 2025. Moody’s expects this cushion to remain tight over the next 12 months, with potential for breach if earnings deteriorate.
The downgrade of the ratings on the senior secured first lien debt to B2 from B1 reflects a shift in the capital structure mix following the repayment of the 2025 unsecured notes with cash and secured revolver borrowings. The reduction in the proportion of unsecured debt lowers the expected recovery on the secured debt in the event of a default.
B&G’s B3 CFR reflects the company’s high financial leverage and relatively aggressive financial policies, highlighted by large dividend payments and the periodic use of debt to fund potentially large acquisitions. B&G’s debt-to-EBITDA leverage is elevated at 7.3x for the last 12 month period ended March 29, 2025, and is projected to remain above 7x over the next 12-18 months due to a challenging operating environment.
The negative outlook reflects the current challenging macro environment, the likelihood of continued weak performance over the next several quarters and our expectation for leverage to remain high over the next 12-18 months. A rating upgrade could occur if B&G is able to improve operating performance, including sustained organic revenue growth, higher profitability, and improved liquidity. A rating downgrade could occur if cost increases, pricing pressure or volume declines reduce earnings, liquidity deteriorates, refinancing risk increases, or the financial policy becomes more aggressive.
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