Fitch: Lorillard notes BBB

Fitch Ratings said it assigned a BBB rating to Lorillard Tobacco Co.'s proposed $500 million senior notes offering.

The outlook is stable.

Lorillard Tobacco has a long-term issuer default rating of BBB, senior unsecured credit facility rating of BBB, senior unsecured notes rating of BBB and short-term issuer default rating of F2.

The notes are senior unsecured obligations and will rank equal in right of payment to all of Lorillard Tobacco's existing and future senior unsecured indebtedness, Fitch said.

The notes will be fully and unconditionally guaranteed on a senior unsecured basis by Lorillard, Inc., the parent company, the agency said. Lorillard Inc. has a long-term issuer default rating of BBB and a short-term issuer default rating of F2.

The proceeds are likely to be used for general corporate purposes, which include share repurchases.

The ratings are supported by the company's consistent and substantial operating earnings and cash flow generation resulting from industry-leading EBITDA and free cash flow margins, Fitch said.

The ratings also consider Lorillard's competitive position in the domestic cigarette market, the agency said, and its ownership of the Newport brand, which has a strong market share in menthol cigarettes, a growing segment within the shrinking U.S. cigarette industry.

The ratings are further supported by the company's U.S. geographic expansion strategy, Fitch said.

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