Fitch upgrades Kraft

Fitch Ratings said it upgraded Kraft Foods Inc.'s long-term issuer default rating and senior debt to BBB from BBB- and its short-term issuer default rating to F2 from F3. It also upgraded Cadbury plc's long-term issuer default rating and Cadbury Schweppes U.S. Finance's long-term issuer default rating and senior debt to BBB from BBB-. The outlook is stable.

The upgrades incorporate Fitch's expectations for Kraft after it spins off its North American grocery business (Kraft Foods Group, Inc.) and changes its name to Mondelez International, Inc. on Oct. 1. The agency said Mondelez will be one of the largest global packaged food companies and maintain substantial scale to compete effectively despite losing the diversification from its $19 billion North American grocery business. Fitch's expectation is that Mondelez will generate faster growth than consolidated Kraft, with 44% of its sales in geographically diversified developing markets.

Partially offsetting the stronger growth prospects are significant exposure to mature but relatively stable markets in developed Europe (37%) and North America (19%), lower margins than historical Kraft, higher foreign exchange volatility and the discretionary nature of the snack category, Fitch said.

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