Moody's gives Heinz Baa2 rating for unsecured notes

by Staff
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NEW YORK — Concurrent with a debt offering and exchange by H.J. Heinz Co., Moody’s Investors Service assigned a Baa2 rating to 30-year unsecured notes to be issued by the company in an exchange offer.

The Heinz notes are being issued in two steps, with the first, a $250 million offer, sold July 22 in a private placement. The notes are be "fully, unconditionally and irrevocably guaranteed" by Heinz, the company said.

The company followed the initial offering with an offer to exchange an additional 7.125% notes due 2039 (of the same series as the notes issued in the private placement), and cash, for $800 million in outstanding 15.59% Dealer Remarketable Securities due in December 2020.

"The company intends to use the net proceeds of the proposed offering for payment of the cash component of the anticipated exchange offer, various expenses relating to the anticipated exchange offer and for general corporate purposes," Heinz said.

The second offering is only made to holders of D.R.S. Heinz will offer for each $1,000 principal amount of D.R.S. tendered and accepted $980 of the new notes, plus a cash amount.

Holders who tender early will receive another $20 in principal amount of 7.125% guaranteed notes as an early participation payment. To qualify, tenders must be made by Aug. 4. Heinz estimated the total exchange price for the D.R.S. at $1,312.50 per $1,000 principal amount of D.R.S.

"As a result of the proposed transactions, total net debt is expected to increase by up to $300 million, depending on the number of D.R.S. exchanged," Moody’s said. "However, the ratings will not be affected."

The agency explained that the "modest increase" in total debt equates to a "tax deductible upfront payment of interest due on the D.R.S. notes," leaving the overall credit profile unchanged.

As part of its rating, Moody’s affirmed the existing Baa2 long-term debt rating, Ba1 preferred stock rating and Prime-2 short-term debt rating of Heinz and its subsidiaries. The rating outlook is stable.

The highest ratings of the B family, debt rated Baa "are subject to moderate credit risk," Moody’s said. "They are considered medium-grade and as such may possess certain speculative characteristics."

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