Cott Corporation's turnaround record of sequential improvement in financial condition has earned its $150 million senior secured credit facility a Ba3 rating fromMoody's Investors Service.Kendra Smith, senior analyst, said the rating reflects the company's improved fiscal discipline, more focused operations, and better quality control. "We gave them credit for the fact that they've definitely improved their fiscal controls," she said. "They've improved their operations. They've grown and stabilized their financial ratios."
The credit, comprising a $50 million revolver and a $100 million term loan, is led by Lehman Brothers and is currently in the market. The outlook on the rating is stable. Based in Toronto, Ontario, Cott is a retailer brand soft drink supplier in the United States, Canada, and the United Kingdom.
The ratings also reflect moderate financial flexibility as the company continues to pursue acquisitive and organic growth. Proceeds from the proposed credit facility will be used to fund the Royal Crown Company (RC) acquisition. The RC transaction is viewed as a positive, defensive acquisition, which should afford the company greater business flexibility.
The ratings, however, reflect significant concentrations in Cott's customer base as well as on-going integration risks, including those associated with the pending $94 million purchase from RC of assets related to the concentrate supply contract. Margins remain under pressure due to potential softening in order volume from large retailers, potential pricing pressures, and to a much lesser extent the unpredictable effects of weather conditions on product demand. "The company remains under pressure to continue to execute its operating efficiencies and other strategies," Smith said.