The Chefs' Warehouse, Inc. -- Moody's says Chefs' Warehouse's term loan upsize is credit negative, ratings not affected

Announcement: Moody's says Chefs' Warehouse's term loan upsize is credit negative, ratings not affectedGlobal Credit Research - 16 Aug 2022New York, August 16, 2022 -- Moody's Investors Service (Moody's) said that The Chefs' Warehouse, Inc.'s (Chefs, B2 positive) upsize to its proposed term loan offering to $300 million from $250 million is credit negative because it will increase leverage. However, the upsize has no impact on the company's ratings and positive outlook. On August 9, Moody's assigned a B2 rating to the proposed term loan due 2029 to be issued by Chefs' Warehouse Parent, LLC and Dairyland USA Corporation. Moody's also upgraded the company's corporate family rating to B2 from B3, probability of default rating to B2-PD from B3-PD, and speculative grade liquidity rating to SGL-1 from SGL-2, while the outlook remained positive."Although the upsizing increases pro-forma debt/EBITDA to 5.2x from 4.8x, and our 2023 projection to 4.1x from 3.8x, the ratings and outlook are not affected because we still expect material deleveraging over the next 12-18 months," stated Raya Sokolyanska, a Vice President at Moody's.The incremental portion of the term loan will be used to add cash to the balance sheet. Pro-forma for the transaction, the company will have approximately $168 million balance sheet cash, the majority of which Moody's expects will be used to fund acquisitions. Moody's forecast credit metrics do not incorporate the potential impact of acquired businesses, whose timing and size is uncertain. Transactions are likely to be in line with the company's recent tuck-in selective purchases of small distributors that increase density in existing markets or establish positions in new regions. As consolidation in the industry picks up following limited activity during the pandemic, Moody's expects larger players such as Chefs to continue gaining share.Headquartered in Ridgefield, Connecticut, The Chefs' Warehouse, Inc. distributes specialty food products to menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos, and specialty food stores in the United States and Canada. The company generated net sales of $2.2 billion for the twelve months ended June 24, 2022.This publication does not announce a credit rating action.For any credit ratings referenced in this publication, please see the issuer/deal page on https://ratings.moodys.comfor the most updated credit rating action information and rating history. Raya Sokolyanska Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Margaret Taylor Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). 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