Moody's: Universal view negative

Moody's Investors Service said it affirmed Universal Corp.'s Ba1 corporate family and probability-of-default ratings and changed the outlook to stable from negative. Also affirmed were the $553 medium term notes at Ba2 (LGD4, 68% from LGD5, 73%). The company's Not Prime rating for commercial paper was not affected.

The outlook is stable.

According to Moody's, the stable outlook reflects enhanced financial metrics as a result of slashing debt and improving operating performance as well as stabilization in certain growing regions, including Brazil.

The Ba1 corporate family rating is supported by its market share in leaf tobacco trading and processing, its well-established relationships with large cigarette companies, and a global procurement and processing network that provides a significant defense to new competitors, the agency said.

The ratings are constrained by the company's earnings and cash flow challenges as an intermediary between large cigarette manufacturers and tobacco growers, Moody's said.

"While Moody's recognizes that Universal has adapted its business practices to the shift to contract markets, the overall risk profile of the tobacco processing business has permanently increased as a result of this structural change," Moody's vice president Janice Hofferber said in a written statement.

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