Moody’s rates Kraft Heinz notes Baa3

Moody's Investors Service said it assigned Baa3 ratings to a total €1.8 billion of senior unsecured notes offered by Kraft Heinz Foods Co. in separate eight-year and 12-year tranches.

Net proceeds will be used primarily to partially fund the contemplated call of $8 billion 9% preferred stock, callable after June 6, 2016.

The outlook is stable.

Moody’s said the Baa3 senior unsecured debt ratings reflect Kraft Heinz Foods’ global scale, strong product diversity and leading brands.

These strengths are balanced against currently high financial leverage, which was just under 5 times debt/EBITDA at year-end 2015 including Moody's all-debt treatment of the $8 billion 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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