Birds Eye owner Nomad Foods took on additional debt to fund the €225 million acquisition this year of Irish frozen pizza-maker Goodfellas, before receiving the threat of a credit downgrade on Monday after sealing another leveraged deal.
Standard & Poor’s (S&P) downgraded the outlook on its rating on Nomad Foods creditworthiness on Monday to “negative” from “stable” after the company announced the new €240 million debt-funded purchase of UK-based frozen food manufacturer of Yorkshire pudding and roast potatoes Aunt Bessies.
The firm already has a “BB-” stance on Nomad, which is three levels below what it considers “investment grade”.
S&P disclosed that Nomad took on €100 million of incremental debt to fund the Goodfellas deal, completed in April, as well as using €125 million of cash it had on hand.
“In our view, after the Aunt Bessie’s acquisition, the financial metrics will be stretched for the current rating,” said S&P, saying that, under its best-case scenario, Nomad will end this year with debt equating to six times its earnings before interest, tax, depreciation and amortisation (ebitda).
“This is well above our guideline of 4.5x-5 times for the current rating,” it said.
