Fitch has assigned ratings to Del Monte Foods Co. (Del Monte) as follows: bank debt ‘BB-‘, senior subordinated notes ‘B’ and senior discount notes ‘B-‘. The Rating Outlook is Stable. Del Monte Foods Co. has approximately $632 million of debt outstanding.

Del Monte competes in the processed vegetable, processed fruit and processed tomatoes sector, which is stable, mature and characterized by slow growth and lower margins relative to other package food companies. However, through innovative packaging, the introduction of new products and a consumption driven marketing strategy, the company has been successful at increasing its top-line growth. Greater focus on penetrating of high-growth distribution channels, such as the mass merchandiser and warehouse clubs are also contributing to the company’s volume growth. Consolidation of processing operations and increased investments in technology, have improved productivity and resulted in strong earnings improvement over the past three years.

Del Monte’s revenue growth during fiscal year 2000 has been negatively impacted by its decision to exit the lower margin, commodity-oriented foodservice business and higher inventory build up at the consumer level due to the Y2K scare. Furthermore, other continuing trends such as, consolidation at the retail level and heightened competition also negatively affected volumes during the fiscal year.

Del Monte’s debt structure is comprised of a credit facility that includes: a $350 million asset-based revolver and a Term A and Term B loan, senior subordinated notes and senior discount notes. The senior most debt, the revolver, is used to fund the company’s working capital needs. The revolver also includes a letter of credit facility. Borrowing under the revolver is determined through an asset-based formula and derived in part by a percentage of accounts receivable and inventory. Amounts prepaid under the Term A loan and the Term B loan may not be reborrowed. The revolver and the Term A loan mature March 2003, while the Term B loan matures 2005.

Del Monte’s credit statistics have improved substantially over the past three years due to lower debt levels and increasing operating earnings and cash flow. In the near-term Del Monte’s credit statistics are likely to remain stable as increasing profitability is somewhat offset by a decline in volume growth. Significant acquisitions are not expected in the near-term, as a result, excess cash is likely to be used to reduce debt. During the intermediate term, acquisitions and the timing thereof will lead to the periodic increases in leverage. For the fiscal year ending June 30, 2000, the company’s EBDITA-to-interest was 2.8 times and its total debt-to-EBDITA was 3.4 times.

Del Monte Foods Company, with net sales of $1.5 billion in fiscal 2000, is the largest producer and distributor of premium quality, branded processed fruit, vegetable and tomato products in the United States. The Del Monte brand was introduced in 1892 and is one of the best known brands in the United States. Del Monte products are sold through national grocery chains, independent grocery stores, warehouse club stores, mass merchandisers, drug stores and convenience stores. The company operates 14 production facilities and six distribution centers in the United States, has operations in Venezuela and owns Del Monte brand marketing rights in South America.

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Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for financial institutions, insurance, corporates, structured finance, sovereigns and public finance markets worldwide.