CHICAGO – Fitch Ratings has assigned an ‘A’ rating to McDonald’s proposed $750 million issuance of 10-year and 30-year senior unsecured notes. As of Sept. 30, 2011, McDonald's had $12.5 billion of total debt.
The notes will be issued under McDonald's Medium Term Notes Program registered with the SEC on Sept. 28, 2009, and rank equally with McDonald's existing debt. There are no financial covenants. Proceeds will be used for general corporate purposes, which may include refinancing of debt. Aggregate maturities of long-term debt are approximately $1 billion in both 2012 and 2013.
McDonald's ratings reflect the company's substantial cash flow generation, considerable financial flexibility, and leading global market position. The ratings also consider the company's significant real estate ownership and well-established franchisee network, which provide a sizeable royalty stream along with contractual rental income on properties owned or leased by McDonald's. At Dec. 31, 2011, franchisees and affiliates operated approximately 81 percent of the company's 33,510 system-wide restaurants. The remaining 19 percent were company-operated.
Over the past five years, McDonald's annual free cash flow (defined as cash flow from operations less capital expenditures and dividends) has averaged $1.6 billion. Year-end cash balances have exceeded nearly $1.8 billion during the same period. McDonald's liquidity is further supplemented by an undrawn $1.5 billion committed revolving credit line expiring Nov. 8, 2016.
McDonald's credit statistics are in line with Fitch's expectations and are projected to remain relatively stable in the near term, even after incorporating the current debt issuance.