Moody’s assigns Baa2 to Kellogg notes

Moody's Investors Service said it assigned a Baa2 rating to €600 million of 1% senior unsecured notes raised by Kellogg Co. on May 10.

Net proceeds will be used for general corporate purposes including, together with cash on hand and additional commercial paper borrowings, the repayment of $750 million of 4.45% senior unsecured notes that mature on May 30, 2016.

Moody’s said the ratings are supported by Kellogg's strong brands and leading global shares in the declining, but highly-profitable, ready-to-eat (RTE) cereal business and its modest share in the global savory snacks category led by Pringles.

The ratings also reflect the agency’s anticipation of possible further consumption declines in RTE cereal, a category that has experienced years of gradual volume declines in developed markets including North America, Europe and Asia.

In addition, operating performance in U.S. snacks has been mixed recently as the company restaged some of its snack bar brands, namely Special K and Kashi.

Finally, the ratings reflect the high costs and execution risks related to the long-dated Project K restructuring program that could cause the company to sustain high financial leverage for the rating category, Moody’s said.

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