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TEXT-S&P: Blue Buffalo ratings unchanged after add-on
November 27, 2012 / 8:46 PM / in 5 years

TEXT-S&P: Blue Buffalo ratings unchanged after add-on

Nov 27 - Standard & Poor's Ratings Services said today that its ratings and
outlook on Wilton, Conn.-based Blue Buffalo Co. Ltd. are unchanged following the
company's announcement that it intends to issue a $50 million add-on facility to
its existing term loan and use the proceeds to fund a special shareholder
dividend. The issue-level rating on the company's revised $400 million senior
secured term loan and existing $40 million revolving credit facility remains
'B+'. The recovery rating on these facilities remains '2', indicating our
expectation for substantial (70%-90%) recovery for senior secured lenders in the
event of a payment default.

The ratings on Blue Buffalo reflect our view of the company's "aggressive" 
financial risk profile and "vulnerable" business risk profile. The company's 
aggressive financial risk profile reflects its substantial increase in debt 
and aggressive financial policy following this proposed debt-financed 
shareholder distribution, which closely follows the company's August 2012 
debt-financed special dividend to shareholders. Key credit factors in our 
assessment of Blue Buffalo's business risk profile include its narrow product 
focus; customer, supplier, and geographic concentration; and the company's 
small size relative to its financially stronger and larger competitors; as 
well as the company's good market position and participation in the faster 
growing natural segment of the U.S. pet food industry.

It is our opinion that Blue Buffalo's financial policy has become more 
aggressive given this second debt-financed dividend in less than six months. 
We estimate that leverage will not decline as quickly as we had previously 
expected because of the additional debt. Our outlook remains positive, given 
our continued expectations for a higher rating if Blue Buffalo is able to 
reduce leverage as planned, albeit at a slower rate than previously 
anticipated. However, if Blue Buffalo is unable to grow EBITDA and reduce 
leverage as expected, we would consider an outlook revision to stable. 

RATINGS LIST

Blue Buffalo Co. Ltd
 Corporate credit rating          B/Positive/--
 Senior secured                   B+
   Recovery rating                2

Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.

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