Fitch rates Kellogg notes BBB+

Fitch Ratings said it assigned a BBB+ rating to Kellogg Co.'s $1.45 billion of senior notes issued in three tranches: $350 million due 2015, $400 million due 2017 and $700 million due 2022. Kellogg has a BBB+ long-term issuer default rating and F2 short-term issuer default and commercial paper ratings, and its senior debt and bank credit facility are rated BBB+. The outlook is negative.

Proceeds will be used to finance a portion of Kellogg's acquisition of Procter & Gamble's Pringles business for about $2.7 billion.

The agency said Pringles will significantly enhance Kellogg's existing snacks business, which is primarily in North America, and provide it with a stronger platform for product and geographic expansion.

Kellogg's ratings incorporate its No. 1 and No. 2 market share positions, strong brand equities and ample liquidity, Fitch said, and the company is diversified geographically.

However, Kellogg has significant exposure to slow-growing, mature markets and modest exposure to faster growing emerging markets, the agency said.

Fitch said the negative outlook reflects that near-term leverage of slightly more than 3.0 times will be high for the rating level and a significant increase from 2.5 times for the last 12 months ended March 31. The outlook also considers that Kellogg's debt-reduction plans may be impeded by current operational challenges, significant reinvestment in its supply chain and the Pringles integration, the agency added.

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