Food group Bakkavor has had its corporate credit rating upgraded by one notch by Standard & Poor’s (S&P) thanks to a continued improvement in trading, earnings and cashflow.
S&P upgraded its rating of Bakkavor’s corporate bonds from B to B+, which is three notches above a triple-C rating considered a “substantial risk”.
It comes after the Gudmundsson brothers retook control of Bakkavor earlier this year in a deal with US hedge fund The Baupost Group to buy out the business’ Icelandic banking shareholders.
“Bakkavor believes the upgrade is recognition of the significant progress the group has made in recent years and the consequent improvements to the financial strength of the business,” the food manufacturer said in a statement.
The S&P added in its upgrade that outlook for Bakkavor was stable and was partly down to the group’s success in deleveraging.
In February, Bakkavor also reported a 3% rise in revenues to £1.67bn thanks to a double-digit growth surge in the international business. Adjusted earnings were up 14% in 2015 to £113.3m as margins widened and free cash generation improved by £48.9m to £92.6m as a result of the increased profitability, effective working capital management and lower interest payments after the refinancing in April 2015.
”The stable outlook reflects our view that Bakkavor’s operating performance should continue to improve, supporting positive free cashflow generation and adequate liquidity,” S&P added.
It is the second ratings upgrade for Bakkavor in a year from S&P. The ratings agency moved the corporate bonds to B from B- in April last year following Bakkavor’s early redemption of £140m of corporate debt and an increase in banking facilities from £80m to £220m, with an extension to the maturity date from October 2016 to February 2018.
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