Moody’s considering downgrading ratings at egg products maker Michael Foods

Moody’s ponders downgrade for Michael Foods

NEW YORK — Moody’s and Standard & Poor’s said Monday they were reviewing ratings on Michael Foods Inc. for possible downgrades after its owner agreed to sell the egg products maker to a Goldman Sachs affiliate.

The ratings agencies said they were concerned that the purchase could be financed by heaping more debt on the company.

Moody’s said it put Michael’s credit-default rating of “B1″ on review after Friday’s announcement of a sale for $1.7 billion, which includes an undisclosed amount of debt. The ratings agency said the sale would increase the company’s debt, and its review for possible downgrade affected about $800 million in debt and bank borrowing.

S&P put the company’s “B+” ratings on watch with negative implications.

Although the company has reduced debt and improved operations over the past five years, “we believe this leveraged buyout transaction could weaken Michael Foods’ credit profile because of the likelihood for it to be funded with additional debt,” said S&P analyst Mark Salierno.

Parent M-Foods Holdings Inc. announced Friday that affiliates of buyout firm Thomas H. Lee Partners LP. would sell most of their stake in Michael Foods to GS Capital Partners. Thomas H. Lee, which bought Michael Foods in 2003, plans to keep a 20 percent stake.

Michael Foods’ brands include All Whites, Better ‘n Eggs and Simply Potatoes. It had $1.54 billion in revenue in fiscal 2009.