Fitch Ratings has downgraded is rating of HJ Heinz Company as the result of Heinz’s weakening credit profile due to significant incremental borrowings to finance acquisitions and share repurchases.
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In a statement, the ratings agency said that it had downgraded the issuer default rating, senior unsecured notes, and unsecured credit facility of HJ Heinz Company (Heinz) and its subsidiaries HJ Heinz Finance Company, HJ Heinz Finance UK Plc, HJ Heinz BV and HJ Heinz Company of Canada Ltd, from ‘A-‘ to ‘BBB’.
Fitch added that Heinz’s ‘F2’ commercial paper rating has been affirmed and that the rating outlook is Stable.
“The downgrade also incorporates risk associated with Heinz’s restructuring of its European operations, which represented 39% of sales and 42% of consolidated operating income in 2005,” a statement from Fitch said.
For the six-month period ending October 26, 2005, the company borrowed US$1 billion and spent approximately US$1.1bn on acquisitions and US$525m on share repurchases, Fitch noted.
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By GlobalDataConsolidated operating income declined 1.5%, excluding US$81m in restructuring costs, during this same period.
“Although global industry factors, such as the difficult European retail environment and rising commodity, energy, and packaging costs, have contributed to this decline, Fitch views increased leverage concurrent with a challenging operating environment reflective of an increasingly aggressive financial strategy,” the statement said.
