McCormick notes rated A2 by Moody's

by Josh Sosland
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NEW YORK — Moody’s Investors Service assigned an A2 credit rating to $250 million of 5.25% senior unsecured notes issued by McCormick & Co., Sparks, Md.

The notes, due in 2013, were issued by McCormick Aug. 26.

Moody’s gave McCormick a stable outlook.

Debt with an A rating "are considered upper-medium grade and are subject to low credit risk," Moody’s said.

The notes were priced at 223 basis points above the five-year treasury yields. Proceeds will be used to reduce outstanding commercial paper, issued earlier in August to fund a $604 million acquisition of Lawry’s from Unilever.

With the issuance of the new notes, McCormick will reduce its commercial notes obligations to about $400 million, equating to 40% of total funded debt.

Moody’s affirmed McCormick credit ratings of A2 for senior unsecured debt and Prime-1 for commercial paper.

"McCormick’s A2 rating is supported by its worldwide leadership positions in the manufacturing and distribution of spices and flavorings, its relatively modest financial leverage, and its stable earnings and cash flow," Moody’s said earlier in August in a credit opinion. "McCormick’s strong credit metrics are balanced against some weaker key qualitative factors, including modest relative size, high exposure to the softening food service industry, and commodity price risk."

Moody’s noted that McCormick operates in business segments — consumer and industrial, each contributing 57% and 43% of 2007 sales, respectively.

"The company expects to increase the mix of higher-margin consumer business to 63% of total sales by 2012," Moody’s said.

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