Fitch cuts Del Monte

Fitch Ratings said it downgraded the issuer default ratings of Del Monte Foods Co. and wholly owned operating subsidiary, Del Monte Corp.

Del Monte Foods' long-term issuer default rating was downgraded to B from B+. Its senior secured bank facility was affirmed at BB+ and senior subordinated notes at B.

Del Monte's long-term issuer default rating was downgraded to B from B+.

Fitch also said it assigned a BB rating with a recovery rating of RR1 to Del Monte Foods' $750 million asset-based loan revolver, a BB rating with a recovery rating of RR1 to its $2.5 billion term loan B and a B- rating with a recovery rating of RR5 on up to $1.6 billion senior unsecured notes.

The outlook is positive.

These actions resolve the negative rating watch placed on Del Monte's ratings in November following news that it signed a definitive agreement to be acquired by Kohlberg Kravis Roberts & Co., Vestar Capital Partners and Centerview Partners for about $5.3 billion.

The downgrade is due to the significant increase in financial leverage and annualized interest expense following the buy-out, Fitch said.

The positive outlook reflects a view regarding Del Monte's future ability to de-lever its balance sheet, given its annual free cash flow generation, relatively high EBITDA margins and leading No. 1 and No. 2 U.S. market share positions in the processed produce and many of the pet food and pet snack categories, the agency said.

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