Fitch assigns ratings to McDonald's notes
Sept. 28, 2011
by Eric Schroeder
CHICAGO — Fitch Ratings has assigned an ‘A’ rating to McDonald’s newly issued $500 million, 2.625%, 10.25-year senior unsecured notes due Jan. 15, 2022. The ratings service also gave the fast-food restaurant chain an outlook of “stable.”
“McDonald’s ratings reflect the company’s substantial cash flow generation, considerable financial flexibility, and leading global market position,” Fitch said. “The ratings also consider the company’s significant real estate ownership and well-established franchisee network, which provides a sizeable royalty stream along with contractual rental income on properties owned or leased by McDonald’s. At June 30, 2011, franchisees and affiliates operated approximately 80% of the company’s 32,943 restaurants systemwide.”
Year-to-date same-store sales were up 4.7% as of Aug. 31, growth that Fitch attributed to expanded beverage and breakfast offerings, restaurant re-imaging and a focus on everyday affordability.
“Fitch expects McDonald’s to continue to generate strong operating results despite prolonged high unemployment, an increasingly competitive environment in the United States, and austerity measures in Europe,” Fitch said.
Fitch noted that McDonald’s plans to spend $2.5 billion on capital expenditures in 2011, up from $2.1 billion in 2010. During the six months ended June 30, 2011, McDonald’s returned a total of $3.4 billion to shareholders in the form of share repurchases and dividends, up from $2.6 billion returned during the same period last year.
Fitch said it expects McDonald’s to pull back on share repurchases should the company experience a prolonged period of same-store sales declines or significant margin compression — events that are not expected to occur.