S&P rates Lorillard notes BBB-

Standard & Poor's said it assigned a BBB- corporate credit rating to Lorillard Inc. and a preliminary BBB- senior unsecured debt rating to Lorillard Tobacco Co.'s planned issue of $750 million of senior unsecured notes due 2019, guaranteed by Lorillard Inc.

The outlook is negative.

Proceeds will be used to fund share repurchases and for general corporate purposes.

"Our ratings on Lorillard reflect the company's participation in the contracting domestic cigarette industry, very high brand and product concentration, lack of geographic diversity, high litigation risk inherent to the cigarette industry and uncertainty with respect to the impact of pending FDA regulation," S&P analyst Mark Salierno said in a statement.

"However, Lorillard benefits from its sizeable and stable cash flow generation, solid operating margins, strong balance sheet and strong brand equity of the Newport brand," the analyst said.

The agency said it expects Lorillard to sustain a total debt-to-EBITDA ratio between 1.5x to 2x.

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