Moody’s Investors Service Inc. has placed its long-term rating of HJ Heinz Co. under review for a possible downgrade following the US food group’s recent announcements of a dividend increase and share buyback programme.
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Last week, Heinz announced a growth plan which included a 16.7% increase in its annual dividend and a US$1bn share buyback programme to be undertaken over the coming two years.
Moody’s, which currently rates Heinz’ senior unsecured debt at “Baa1″, or medium grade, said the review reflects Heinz’ “shift to a decidedly more shareholder-friendly financial policy…that will likely lead to deteriorating credit metrics already weak for the Baa1 category”.
Moody’s also said the softness in Heinz’ European operations, resulting from lower pricing and higher costs, and weakness in the US foodservice business, which has been impacted by rising energy costs, were other factors behind the review.
But Moody’s reaffirmed its short-term Heinz rating of Prime-2, based on the assumption that the long-term review will result in no worse than a downgrade of one notch.
