Fitch downgrades Campbell

Fitch Ratings said it downgraded Campbell Soup Co.'s issuer default rating to A- from A after the company agreed to acquire Bolthouse Farms for $1.55 billion in debt financed transaction.

The outlook is stable.

The downgrade reflects Campbell's substantial increase in leverage for the acquisition, which is expected to close later this summer, according to the agency. Initial pro forma leverage, of total debt to EBITDA, will be in the high 2x range, which is well above the 1.6 to 1.8x leverage range Campbell's has maintained over the past several years, the agency noted.

The stable outlook reflects that debt reduction and modest EBITDA growth should bring leverage down to the low 2x range within 18 to 24 months of the deal closing, which is comfortably in the A- rating category, Fitch said.

Campbell's ratings reflect its significant cash flow generation, modest leverage and balanced financial strategy, the agency said.

The ratings incorporate Campbell's leading position in the high margin soup category and the strength of its branded product portfolio, which focuses on simple meals, baked snacks and healthy beverages, the agency added.

However, the ratings also consider the mature and highly competitive nature of the soup category and Campbell's prolonged underperformance, Fitch noted.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.