Moody’s gives Baa3 to Kraft Heinz notes

Moody's Investors Service said it assigned Baa3 ratings to a total $5 billion of senior unsecured notes being offered by Kraft Heinz Foods Co. in separate 10-year and 30-year tranches.

Net proceeds will be used primarily to call a portion of the company's $8 billion 9% preferred stock, callable June 6, 2016.

The outlook is stable.

Moody’s said the Baa3 senior unsecured debt rating reflects Kraft Heinz’s global scale, strong product diversity, and leading brands. These strengths are balanced against currently high financial leverage – just under 5 times debt/EBITDA at year end 2015, including Moody's all-debt treatment of the $8 billion of preferred stock.

Additionally, the rating reflects the agency’s expectation that the company will successfully achieve at least $1.5 billion of cost reduction, significant working capital savings and $2 billion of debt reduction within 18 months. The historically aggressive financial strategies and serial pace of acquisitions employed by lead shareholder 3G Capital weigh on the upside potential of the ratings.

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