Moody’s gives Vector notes Ba3

Moody’s Investors Service said it assigned a Ba3 rating to Vector Group Ltd.’s $850 million senior secured eight-year notes. The outlook is stable.

Proceeds from the new notes will be used to refinance the existing $850 million senior secured notes due in 2025.

Vector's B2 corporate family rating reflects its relatively small scale compared to larger U.S. tobacco companies and limited pricing flexibility. The company participates in the deep discount cigarette segment that is highly regulated.

Vector’s credit profile also reflects its aggressive financial policy, modest free cash flow and the ongoing threat of adverse tobacco litigation and regulation.

Moody’s said partially offsetting these risks is Vector’s good track record of increasing EBITDA operating performance and improving share in the U.S. cigarette market. The company holds a cost advantage based on the beneficial terms provided under the Master Settlement Agreement.

Vector also has very good liquidity with large cash balances and real estate investments that are conservatively managed and a realtor business that provides an additional source of earnings diversification, the agency said.

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