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TEXT-S&P assigns preliminary rating to Kraft Foods Group
May 30, 2012 / 7:58 PM / 6 years ago

TEXT-S&P assigns preliminary rating to Kraft Foods Group

May 30 - Standard & Poor's Ratings Services today assigned our preliminary
'BBB' issue-level rating to Illinois-based Kraft Foods Group Inc.'s (KFG)
proposed senior unsecured notes expected to total about $6 billion, composed of
a three year, five year, 10 year, and 30 year tranche (actual amounts and
maturity dates to be finalized at the close of the transaction) to be issued
under Rule 144A with registration rights. The preliminary senior unsecured debt
is rated at the same level as the company's preliminary long-term corporate
credit rating because we currently believe that substantially all of the
company's cash flow is generated at the issuer, KFG. Based on this assumption,
we do not designate a notching distinction for the ratings on the notes.
However, should further information become available following the spin-off that
would change these assumptions, we would reconsider our assessment of structural
subordination. 	
	
We expect the net proceeds from the proposed offering will fund a distribution 	
to KFG's existing parent company, Kraft Foods Inc. (BBB/Stable/A-2), which 	
will in turn be used to fund repurchases or redemptions by Kraft Foods of its 	
outstanding debt.  	
	
KFG is currently a subsidiary of Kraft Foods and currently includes its snack 	
foods and grocery businesses. Kraft Foods is spinning off the North American 	
grocery business, which will retain the Kraft Foods name through a 	
distribution of its common stock to its shareholders, in a transaction it 	
expects to complete before 2012 year-end. 	
	
Our preliminary corporate credit rating on newly formed grocery business KFG 	
assumes the spin-off will occur in accordance with the plans disclosed by 	
Kraft Foods, including in KFG's Form 10 filing. The preliminary corporate 	
credit rating for KFG reflects our assessment of the company's business risk 	
profile as "strong" and financial risk profile as "significant." Key credit 	
factors in our assessment include the company's well-recognized brands and 	
product diversification within the mature and low-growth packaged food markets 	
of North America, yet narrow geographic focus and exposure to volatile 	
commodity input costs. Our view of the company's financial risk profile as 	
significant reflects financial policies we consider aggressive, including an 	
expected very high dividend payout rate, adequate liquidity, and key credit 	
measures that we believe will strengthen and remain consistent with indicative 	
ratios for a significant financial risk profile.	
	
Related Criteria And Research	
     -- Research Update: Kraft Foods Group Inc. Assigned Preliminary 'BBB/A-2' 	
Ratings In Anticipation Of Spin-Off; Outlook Negative, May 24, 2012	
     -- Key Credit Factors: Criteria For Rating The Global Branded Nondurable 	
Consumer Products Industry, April 28, 2011	
     -- Business Risk/Financial Risk Matrix Expanded, May 27, 2009	
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008	
     -- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008	
	
Ratings List	
Kraft Foods Group Inc.	
 Corporate credit rating      BBB(prelim)/Negative/A-2(prelim)	
	
Rating assigned	
Kraft Foods Group Inc.	
 Senior unsecured	
  notes                       BBB(prelim)

0 : 0
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