Fitch takes action on Smithfield ratings

by Meat&Poultry Staff
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CHICAGO – Fitch Ratings upgraded Smithfield Foods Inc.’s debt and said the company’s rating outlook is stable.

Fitch said the upgrade of Smithfield's 6.625 percent notes reflects the fact that none of the company's public notes are guaranteed following the August 2012 refinancing of its 10 percent secured notes due July 15, 2014. Fitch also upgraded Smithfield's Issuer Default Rating and guaranteed unsecured notes to 'BB' on July 19, 2012 because the refinancing improved Smithfield's overall credit profile by reducing interest, eliminating an early maturity trigger on the firm's inventory revolver and extending maturities.

Smithfield's ratings incorporate the firm's balanced financial policies, periodic earnings volatility, mid-single-digit EBITDA margin and single-protein concentration, the ratings agency said. The ratings also take into account the company's risk-management capabilities and sizeable branded packaged meats business which provides a more stable source of cash flow than fresh pork products, according to Fitch.

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