Standard & Poor's has lowered its corporate credit and senior unsecured debt ratings for ketchup and condiment manufacturer HJ Heinz to 'BBB+' from 'A-'.

"We have also lowered the company's 'BBB' preferred stock rating to 'BBB-'; all ratings, including the A-2 short term and commercial paper ratings and A-1 (LOW) Canadian CP Rating Scale, remain on CreditWatch with negative implications where they were placed on May 23, 2006, following 5.4% aggregate shareholders Trian Fund Management LP and Sandell Asset Management Corp.'s release of a position paper detailing its proposed plan which included a proposal for a more aggressive financial policy, including increased share repurchases, dividends, and leverage," said Standard & Poor's credit analyst Nicole Delz Lynch.

The downgrade reflects a more aggressive financial policy than incorporated into the former rating, S&P said.

"We do not believe that management's plan (Superior Value and Growth Plan for fiscal years 2007 and 2008 released June 1, 2006) would enable Heinz to restore credit measures to levels consistent with the rating category as previously expected. Moreover, Heinz' ratings will remain on CreditWatch until the current proxy contest is resolved," the ratings agency added.

The Trian Group is seeking five seats on Heinz's 12-member board of directors at the shareholder meeting scheduled for 16 August, 2006.

"A successful election of those board members would likely further strain financial policy. The Trian Group has proposed raising debt levels and leverage to 3.5x or more (on a net debt basis), subject to maintaining investment grade ratings. As per Trian's
proposal, proceeds from debt financings would fund aggressive share repurchases and dividends, above levels proposed by Heinz' management. If this scenario were to come to fruition, it is likely that Heinz' ratings would be lowered further," S&P added.

S&P said that it would re-evaluate the company's future operating and financial policies following the shareholder meeting in order to resolve the CreditWatch listing.