Fitch affirms Del Monte

Fitch Ratings said it affirmed Del Monte Foods Co.'s BB issuer default rating and Del Monte Corp.'s BB issuer default rating, BB+ senior secured bank facility and BB- senior subordinated notes. The outlook is stable.

Fitch said the affirmation follows Del Monte's announced that it had entered an agreement to sell its private-label soup and infant feeding businesses for $275 million, including working capital adjustments. Del Monte also disclosed plans to acquire Meow Mix Holdings Inc. for $705 million, including about $23 million in expected tax benefits, using proceeds from its divested assets, cash on hand and incremental borrowings.

At about 2.7x sales, the price Del Monte is paying for Meow Mix is significant, but Fitch said the combined actions are in line with Del Monte's strategy of leveraging its brands and increasing consolidated margins. Over the longer term, Fitch predicted that these transactions will contribute positively to Del Monte's profitability and cash flow generating ability.

For the last 12 months ended Jan. 29, Del Monte's total debt to operating EBITDA was 3.1x, EBITDA to gross interest expense was 3.5x and cash flow from operations to total debt was 26%. On a pro forma basis, Del Monte's total debt to EBITDA is expected to be just under 4.0x, the agency said.

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