Moody's lifts Smithfield to SGL-3

Moody's Investors Service said it upgraded Smithfield Foods, Inc.'s speculative-grade liquidity rating to SGL-3 from SGL-4 and affirmed the Ba3 (LGD2, 24%) rating on its senior secured notes due 2014 following a proposed $225 million add-on to the existing $625 million of notes.

The agency also affirmed the company's B2 corporate family and probability-of-default ratings and Caa1 (LGD5) senior unsecured debt ratings and revised the loss-given-default rate assigned to the senior unsecured debt to 84% from 83%.

The outlook remains stable.

Moody's said the upgrade in the speculative-grade liquidity rating reflects the improvements made to Smithfield's capital structure, including the replacement of its straight domestic revolving credit agreement with a $1 billion asset-based loan and the additional liquidity represented by the upsizing in the bonds.

Smithfield's B2 corporate family rating incorporates the volatility in its operating performance and its low margins given the commodity nature of its products, the agency said, adding that the resulting weak credit metrics have not been offset by the long-term benefits from the company's market position as the world's largest hog and pork producer.

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