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TMCNet:  Fitch: No Immediate Rating Action for ConAgra from California Lead Paint Ruling

[December 17, 2013]

Fitch: No Immediate Rating Action for ConAgra from California Lead Paint Ruling

CHICAGO --(Business Wire)--

According to Fitch Ratings, there is no immediate change to ConAgra Foods, Inc.'s (ConAgra) ratings following the Superior Court of California's Dec. 16, 2013 proposed statement of decision in a lead paint case against ConAgra Grocery Products Company (ConAgra Grocery), a wholly owned subsidiary of ConAgra.

The proposed decision orders the creation of a $1.1 billion California abatement fund to replace or contain lead paint in homes. The liability is joint and several against Sherwin-Williams Co. ('A-'/Stable), NL Industries and ConAgra Grocery. ConAgra's proportional share is currently unknown. Fitch will monitor future rulings and take appropriate rating actions if it becomes clear that any future payout would have a material adverse effect on the company's leverage, financial condition, results of operations or liquidity.

ConAgra has never manufactured or sold paint. ConAgra Grocery was included in the case due to its linkage to a former subsidiary of Beatrice Company that manufactured lead paint until the 1950s. That paint company was dissolved in 1968, 45 years ago and 22 years prior to ConAgra's acquisition of Beatrice. ConAgra does not believe it inherited any liabilities of the dissolved entity.

ConAgra plans to appeal this decision and vigorously defend itself in this case and any lead paint related litigation. Several states have rendered favorable decisions in other lead paint related litigation. The appeals process is likely to be lengthy and last several years. ConAgra does not believe an appeal bond is legally required in this case. However, if necessary Fitch believes ConAgra can post an appeal bond without putting strain on its current ratings.

The ratings factor in ConAgra's commitment to prioritize its free cash flow (FCF) to repay a total of $1.5 billion of debt through fiscal 2015. The ratings and Stable Outlook also factor in progress toward ConAgra's anticipated improvement in Consumer Foods' operating performance in the second half of fiscal 2014.

ConAgra maintains adequate liquidity, including an undrawn $1.5 billion revolving credit facility (RCF) that provides backupto its commercial paper (CP) program. The company had $280 million CP outstanding and $194 million cash at Aug. 25, 2013. Subsequent to the end of the quarter, ConAgra extended its RCF by two years to Sept. 14, 2018. At Aug. 25 2013, ConAgra had $900 million outstanding on its term loan which matures Jan. 29, 2018. The company intends to pay off the balance by the end of fiscal 2015 and currently does not have amortization payments due to prepayments completed.

ConAgra would be in default under its credit agreements if it incurs final judgments, after all appeals have been exhausted, in excess of $35 million (excluding amounts covered by insurance and coverage has not been denied) outstanding for more than 30 days from its date of entry and not discharged in full or stayed. The credit facilities have a 75% maximum debt-to-capital covenant for four quarters beginning Jan. 29, 2013, declining to 65% over time. ConAgra plans to refinance its $500 million 5.875% notes due in April 2014. Additional maturities include $250 million 1.35% notes due in September 2015.

ConAgra's and its subsidiary, Ralcorp Holdings, Inc.'s (Ralcorp) ratings are as follows:

ConAgra Foods, Inc.

--Long-term Issuer Default Rating (IDR) at 'BBB-';

--Senior unsecured notes at 'BBB-';

--Bank credit facility at 'BBB-';

--Subordinated notes at 'BB+';

--Short-term IDR at 'F3';

--Commercial paper at 'F3'.

Ralcorp Holdings, Inc.

--Long-term IDR at 'BBB-';

--Senior unsecured notes at 'BBB-'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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