S&P ups Reynolds American outlook to positive

Standard & Poor's said it revised its rating outlook on Reynolds American Inc., as well as its wholly owned subsidiary RJ Reynolds Tobacco Holdings Inc., to positive from stable.

At the same time, S&P said it raised its senior secured debt rating on Reynolds American's existing senior secured notes to BBB-, one notch higher than the corporate credit rating, from BB and revised the recovery rating to 1 from 3.

All other ratings on the company, including the BB+ corporate credit rating, were affirmed, the agency said, noting that the outlook revision is due to Reynolds American's improved operating performance following the acquisition of Conwood in May 2006, its continued margin expansion, moderating shipment and market share declines and a more favorable legal environment.

According to S&P, the ratings on Reynolds American and its wholly owned subsidiary RJ Reynolds, continue to reflect the company's participation in the contracting domestic cigarette industry, its declining shipment volumes and market share and significant litigation risk partly offset by relatively moderate financial policies.

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