S&P cuts Kraft Heinz

S&P said it downgraded Kraft Heinz Co. to BB+ from BBB-.

Its short-term rating was lowered to B.

The agency also lowered the issue-level ratings on the group's senior unsecured debt to BB+ and assigned a recovery rating of 3, indicating that creditors could expect meaningful (50%-70%; rounded estimate: 60%) recovery in the event of a payment default.

“Kraft Heinz Co.'s financial policy has become more aggressive given its unwillingness to cut its high payout dividend at a time that leverage is elevated because of underperformance,” S&P said in a news release.

“A more aggressive stance is also supported by statements about maintaining price discipline around potential asset sales, demonstrating management's lack of commitment to meaningfully deleverage during the next 12 months.

“Moreover, there has been significant mismanagement and a substantial decline in enterprise value over the past few years due to a failure to successfully manage the cost structure and brand portfolio, as characterized by the over $1.5 billion decline in EBITDA.”

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