S&P lowers Del Monte

Standard & Poor's said it lowered the corporate credit rating on Del Monte Foods Co. to B+ from BB and removed all the ratings from CreditWatch, where they were placed with negative implications on Nov. 22.

The agency also lowered Del Monte's senior secured credit facility to BB from BBB-. The recovery rating is 1, which indicates expectation of 90% to 100% recovery.

S&P also lowered Del Monte's senior subordinated notes to B+ from BB. The recovery rating is 3, which indicates expectation of 50% to 70% recovery.

The agency also assigned a B+ rating to the proposed $2.5 billion senior secured term loan B. The recovery rating is 3, which indicates expectation of 50% to 70% recovery and a B- rating on the proposed $1.5 billion senior notes to be issued in eight- and 10-year tranches. The recovery rating is 6, which indicates expectation of 0 to 10% recovery.

The outlook is stable.

"The downgrade reflects a weaker financial profile following the proposed capital structure, which will increase debt by about $2.6 billion," S&P analyst Alison Sullivan said in a statement.

Estimated pro forma adjusted leverage is about 6.8x for trailing 12 months ended Oct. 31, compared with 2.8x prior to the transaction.

"We expect credit measures to gradually improve, with leverage in the low-6x area by fiscal year-end April 2011," Sullivan added.

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