Midwest Food Co. On Review; Trend Springs Surprise Filing

  • 17 Nov 2002
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The ratings of Midwestern food wholesale company Nash Finch have been placed on "rating watch negative" by Fitch Ratings after the company announced it is under an informal inquiry by the Securities and Exchange Commission and has postponed third quarter earnings results. The ratings include the BB bank credit facility and the B+ senior subordinated debt, affecting $380 million of debt. The SEC is investigating practices and procedures relating to certain promotional allowances provided to the company by its vendors that reduce the cost of goods sold, according to Fitch.

The agency expects to resolve the "rating watch negative" opinion once management provides clarity and the magnitude of any potential earnings implication is determined. Events that could lead to a downgrade include a restatement of prior year financial statements and a negative outcome from the SEC inquiry. Furthermore, the company continues to operate in a highly competitive environment with supercenters continuing to add new units in Nash Finch's core markets. A statement from Nash Finch states, the "company does not know at this time the effect, if any, the results of its review will have on the previously reported financial results and will be unable to comment further until an appropriate time." A spokesman did not return calls.

* Moody's Investors Service has lowered Trend Technologies ratings after the designer and manufacturer of integrated plastic and metal enclosures for electronic applications unexpectedly filed for Chapter 11. The ratings are under review for further downgrade, pending the receipt of additional information on the company's current operations. The $147 million senior secured term loan and $70 million revolver, have both been lowered to Caa2 from B1. Moody's review will evaluate the prospects for principal repayment under the bank facilities, arranged by Deutsche Bank.

Moody's notes there is uncertainty over principal recovery of the bank loans. While the company has been grappling with realigning its North American facilities and consolidating excess capacity, the bankruptcy filing was unexpected. The fabrication of enclosures for the computing, networking and telecommunications industries has been migrating to lower cost regions, according to Moody's. Trend's footprint extended to Guadalajara, Mexico and, by means of its November, 2000 acquisition of Cowden International, to Singapore and Malaysia, but the company did not have a presence in China, where the modest wage rates are unparalleled. Trend has entered into a sale agreement with a group led by Earl Payton, the company's former ceo, to sell virtually all of the operating assets for approximately $70 million. The Chapter 11 filing is designed to facilitate the sale. A spokesperson for the company did not return calls.

  • 17 Nov 2002

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