Fitch has rated ConAgra Inc.’s (ConAgra) $1.65 billion senior notes offering ‘BBB+’. Fitch rates ConAgra’s senior unsecured notes ‘BBB+’, subordinated debentures ‘BBB’ and commercial paper ‘F2’. Fitch also rates ConAgra Capital, L.C. preferred securities ‘BBB-‘.
The $1.65 billion senior notes offering comprises three tranches: $600 million 7.5 percent due September 15, 2005, priced to yield 7.552 percent, $750 million 7.875 percent due September 15, 2010 priced to yield 7.875 percent and a 10-year $300 million 8.25 percent due September 15, 2030 priced to yield 8.332 percent.
Proceeds from the offering will be used to refinance the short-term debt issued in the acquisition of International Home Foods Inc., which was completed in August 2000.
ConAgra’s credit protection measures improved throughout the 1990s due to increasing cash flow. The company’s sizeable and historically stable cash flow combined with its hedged commodity inventory help mitigate the financial risk associated with a leveraged capital structure.
ConAgra’s credit protection measures have declined in the near term due to higher leverage resulting from acquisition of International Home Foods Inc.
On a pro forma basis, utilizing ConAgra’s fiscal year data and the latest 12 months data for International Home Foods Inc., total debt- to-EBDITA was 2.4 times and EBDITA-to-interest was 4.6 times.
However, Fitch expects meaningful improvements in ConAgra’s credit protection measures in the intermediate term due to synergies from the acquisition, significant cost savings from the company’s restructuring plan and the utilization of free cash flow to reduce debt.
ConAgra is a market leader in a number of businesses throughout the food chain industry. The company has more than 80-plus brands, in which more than 33 brands each have sales exceeding $100 million. Approximately 58 percent of the company’s operating income was derived from its stable and highly profitable package foods segment in fiscal 2000.
Major businesses within this segment include branded shelf stable packaged foods (e.g. Hunt’s, Wesson, Van Camp’s, Chun King and La Choy) and frozen foods (e.g. Banquet, Healthy Choice and Marie Callender’s).
ConAgra’s Healthy Choice label continues to be one of the company’s greatest successes with fiscal year 2000 sales in excess of $1.5 billion. The refrigerated foods segment (meat, poultry, lamb and cheese products) includes such brands as Butterball, Armour and Swift Premium and contributed 26 percent to the company’s operating income.
ConAgra’s agricultural product segment (crop protection chemicals, grain processing, commodity trading) contributed 16 percent to its operating income in fiscal year 2000. International Home Foods Inc. major brands include PAM cooking spray, Chef Boyardee pasta products, Bumble Bee Tuna, Louis Kemp Seafood and Gulden’s Mustard.
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