Moody's ups General Mills debt to Baa1

Moody's Investors Service said it upgraded General Mills Inc.'s senior unsecured debt rating to Baa1 from Baa2 and senior unsecured/subordinated/preferred shelf to prospective Baa1/Baa2/Baa3 from prospective Baa2/Baa3/Ba1. The Prime-2 short-term debt rating was affirmed.

The outlook is stable. This concludes the review for possible upgrade that began on April 27.

Moody's said the upgrade reflects General Mills' success in reducing debt by $2 billion over three years following the 2002 leveraged acquisition of Pillsbury from Diageo, the company's relatively stable operating performance across a diverse portfolio of food product categories despite input cost pressures and lost share in the key Big G segment and its strengthened credit profile since 2002.

General Mills' ratings reflect strong brand equity across a diverse portfolio, the agency said. Nearly all of the company's products rank number one or two in attractive categories that together generate operating margins in excess of 17%.

This strength is balanced against credit metrics that are somewhat weak for the Baa category and a financial policy that has become more aggressive in terms of share repurchases, Moody's noted.

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