S.&P. lowers Dean outlook to 'stable' from 'positive'

by Eric Schroeder
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NEW YORK — Standard & Poor’s Ratings Services on Friday revised its outlook on Dallas-based Dean Foods Co. and its wholly owned subsidiary, Dean Holding Co., to stable from positive. At the same time, S.&P. affirmed its "BB+" corporate credit rating and other ratings on Dean Foods and Dean Holdings. Dean Foods had total debt of $3.3 billion as of Sept. 30.

"The outlook revision reflects Standard & Poor’s expectation that in the near to intermediate term the company will use a substantial portion of free cash flow for share repurchases rather than for permanent debt reduction," said Jayne Ross, credit analyst with S.&P.

S.&P. said that while the company may face some higher energy and resin costs in the next several quarters as well as the continuing effect of several hurricanes, credit protection measures should remain at or near their current levels. The ratings service also expects that Dean Foods will be acquisitive and will take advantage of consolidating trends in the dairy and related food.

"Acquisitions are expected to be of a size such that their integration into Dean Foods’ operations should continue to be fairly seamless," S.&P. said. "The company has the financial flexibility to pursue acquisitions in related industries under its revolving credit facility and with its stable cash flow from operations."

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