NEW YORK — Sweetheart Cup Co. Inc. plans to tackle new products and fresh markets as a means of improving cash flow.
New York-based Standard & Poor's Corp. has downgraded its outlook for Sweetheart from stable to negative and placed its debt rating at a B grade. S&P blamed recent weaker-than-anticipated operating performance at the Owings Mill, Md.-based food-service products supplier.
Because of weak demand and increased price competition, the firm currently has a cash flow coverage of debt of about 8 percent. But, Sweetheart plans new products and entries into noncore markets, such as food packaging and club stores. This will raise cash flow coverage of debt to 10-15 percent.
Sweetheart makes plastic and paper products sold to the restaurant, institutional, industrial and delicatessen markets.
The S&P ratings assume a steady strengthening in the company's liquidity and financial profile. The corporate credit rating and senior secured debt garnered a B+ while the subordinated debt received a B-.
Sweetheart had estimated thermoforming sales of $255 million for the year ended Sept. 30, which placed the firm at No. 2 in Plastics News' North American thermoformers ranking earlier this year. The company had overall sales of $903.3 million for the same period.