DBRS rates Kellogg notes A (low)

DBRS said it assigned a rating of A (low) with a stable trend to Kellogg Co.'s proposed issue of $1 billion 4% senior unsecured notes maturing Dec. 15, 2020.

The proceeds are expected to be used primarily towards a voluntary pension contribution in 2010 of about $500 million, net of tax, and repayment of commercial paper issued to fund share repurchases during 2010.

The company's strong business profile continues to underpin the A (low) rating based on Kellogg's strong portfolio of brands, market position as the world's largest cereal company, large scale and improving product and geographic diversification, DBRS said.

The notes will be unsecured and unsubordinated obligations and will rank pari passu with all of Kellogg's other unsecured and unsubordinated indebtedness, the agency said.

The reduction of the company's underfunded pension plan and share repurchases will reduce Kellogg's liquidity position and increase debt levels, which were previously expected to remain stable through 2010, DBRS said.

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