Research: Rating Action: Moody’s downgrades INW Manufacturing’s CFR to Caa1; outlook negative

New York, July 13, 2022 — Moody’s Investors Service (“Moody’s”) downgraded INW Manufacturing, LLC’s (“INW”) Corporate Family Rating (“CFR”) to Caa1 from B3 and Probability of Default Rating to Caa1-PD from B3 -PD. Moody’s additionally downgraded the company’s senior secured term loan rating to Caa2 from B3. The ratings outlook is changed to negative from stable.

The downgrade reflects INW’s weaker than expected financial results for fiscal 2021 and the first quarter ended March 31, 2022 and Moody’s expectations that earnings will remain weak, leverage will remain high and that negative free cash flow will weaken liquidity over the next 12 to 18 months . Inflationary headwinds, supply chain challenges, and labor shortages have all been headwinds for the company in 4Q21 and 1Q22, resulting in a sharp decline in EBITDA.

Moody’s expects the company will continue to face inflationary headwinds and supply chain challenges over the next year. As of March 31, 2022, INW’s Moody’s adjusted debt to EBITDA was high at 9.2x. Moody’s projects that INW’s debt to EBITDA will remain in the mid 8x range in the next 12 to 18 months as EBITDA growth is likely to be limited. Although management has taken some price actions to offset cost pressures, Moody’s believes inflationary headwinds and high freight costs will continue to be a headwind.

Insurance proceeds related to the Carrollton fire and an equity injection from the private equity sponsor have helped to partially fund cash needs including lost earnings due to the fire and capital spending related to capacity expansion and the buildout of a new aseptic manufacturing facility. However, revolver usage has increased and Moody’s believes INW is reliant on the revolver to fund negative free cash flow and the $22 million of annual term loan amortization and this is weakening liquidity.

Management is taking steps to stabilize performance. Price taken earlier this year should help offset some of the cost increases headwinds though Moody’s anticipates it will be difficult for the company to fully recover cost increases, leading to continued margin pressure. In addition, INW has replaced its Carrollton, Texas manufacturing facility, which was impacted by a fire in July 2021, with a new expanded Dallas, Texas based manufacturing facility that became operational in April 2022. As of July 2022, INW has been able to secure 85% of the plant’s annual production capacity with approximately 90% of its customers from the Carrollton, Texas facility. The addition of this new facility should also help to improve profitability for INW.

The downgrade of the term loan rating to Caa2 from B3 additionally reflects increasing utilization of the asset based revolver, which has a higher priority claim on accounts receivable and inventory. Higher revolver usage would weaken the term loan residual collateral position on these assets and the recovery prospects in the event of a default.

The following ratings/assessments are affected by today’s action:

Ratings Downgraded:

..Issuer: INW Manufacturing, LLC

…. Corporate Family Rating, Downgraded to Caa1 from B3

…. Probability of Default Rating, Downgraded to Caa1-PD from B3-PD

….Senior Secured Bank Credit Facility, Downgraded to Caa2 (LGD4) from B3 (LGD4)

Outlook Actions:

..Issuer: INW Manufacturing, LLC

….Outlook, Changed To Negative From Stable


INW’s Caa1 CFR reflects the company’s high debt-to-EBITDA of 9.2x (Moody’s adjusted) for the LTM period ended March 31, 2022, in addition to negative free cash generation flow during the LTM period and projected for fiscal 2022 and fiscal 2023. The rating also reflects the company’s relatively small scale and its aggressive revenue growth strategy based on acquisitions and low organic growth. The vitamin minerals and supplements (VMS) co-packaging industry is very competitive. INW attempts to differentiate itself from competitors by creating a one-stop-shop in which it can offer customers many different product formats, such as powders, tablets, capsules, liquids, soft-gels, bars, and gummies. Cornell Capital plans to double INW’s EBITDA through organic growth and acquisitions. Moody’s believes this growth strategy will help the company expand its customer reach. However, the aggressive growth strategy also increases credit risk and integration risk as future acquisitions are likely to be debt financed. Having said that, INW’s management team has stated that they would like to maintain a debt-to-EBITDA ratio of 4.0-5.0x over the long-term.

Moody’s expects INW to operate with weak liquidity based on $25.6 million of cash as of May 31, 2022, approximately $61.7 million of availability under the $115 million ABL revolver (as of May 2022), free cash flow of -$20 to -$40 million after capital expenditures of approximately $30-40 million in the next 12 months, and no meaningful maturities through 2026 aside from approximately $22 million of required annual term loan amortization. Moody’s believes the unused revolver capacity is sufficient to meet the cash needs, but growing usage will constrain liquidity particularly if the company is unable to execute an operational turnaround in 2023.

INW has exposure to environmental risks because it is reliant on energy and agriculture inputs that are natural resource intensive and could be negatively impacted by climate change. In addition, the company is also exposed to waste and pollution through its use of packaging materials that often are not or cannot be recycled.

INW is exposed to social risks. The company faces responsible production risks because the company must manage a complex supply chain while maintaining product safety and quality measures in order to prevent contamination. Customer relations risk exists but is limited as the company has very limited direct relationships with consumers and does not face labeling and disclosure risks. Consumer focus on health and wellness initiatives creates good long-term demand for the VMS industry though the company must sustain product development that adjusts to changing consumer preferences to help mitigate demographic and social trend risk. Lastly, the company is exposed to the health & safety risks of its employees as a manufacturer of vitamins, minerals, and supplements.

Moody’s views INW’s financial policies as aggressive given its high financial leverage, private equity ownership and focus on growth through acquisitions that can lead to increased debt and integration risks.


The negative outlook reflects Moody’s view that INW will be challenged to stabilize earnings and restore positive free cash flow over the next year due to continued cost and competitive pressures. The negative outlook also reflects the potential that increasing revolver utilization will further reform.

INW’s ratings could be upgraded if the company significantly improves its operating performance, generates meaningful positive free cashflow on an annual basis, improves liquidity, and reduces leverage such that debt-to-EBITDA is sustained below 6.5x.

Ratings could be downgraded if revenues declines, the company is unable to stabalize operating earnings and margins, free cash flow remains negative, or equity deteriorates further.

The principal methodology used in these ratings was Consumer Packaged Goods published in June 2022 and available at Alternatively, please see the Rating Methodologies page on for a copy of this methodology.

INW Manufacturing, LLC (“INW”) headquartered in Ogden, Utah provides development and manufacturing services for the global nutrition and wellness industry. The main company’s capabilities include powders, solid dose, cosmetics, liquids, gel packs and nutrition bars; serving 550+ customers in the sports, nutrition, diet, energy, hydration, personal care, cosmetics, pet care and other related industries. The company has 14 manufacturing facilities which produce over 4,000 SKUs. Cornell Capital acquired the company in a March 2021 leveraged buyout simultaneous with the purchase of Bee Health, and acquired Capstone Nutrition in May 2021.


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Frank Henson
Vice President – Senior Analyst
Corporate Finance Group
Moody’s Investors Service, Inc.
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John E. Puchalla, CFA
Associate Managing Director
Corporate Finance Group
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Client Service: 1 212 553 1653

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