Moody's cuts Chiquita view to negative

Moody's Investors Service said it changed the outlook for Chiquita Brands International, Inc. to negative from stable based on the agency's concern that Chiquita may be challenged to maintain credit metrics that are appropriate for its rating over the intermediate term due to the company's anemic operating profitability in the first quarter and the negative impact on leverage and profitability from the announced definitive agreement to sell and re-charter Chiquita's shipping fleet.

The agency also affirmed the company's corporate family and probability-of-default ratings at B3, $250 million 7½% senior unsecured notes due 2014 and $225 million 8 7/8% senior unsecured notes due 2015 at Caa2 (LGD5, 89%) and Chiquita Brands LLC's $200 million senior secured revolving credit agreement, $24.3 million senior secured term loan B and $368.4 million senior secured term loan C at B1 (LGD2, 26%).

Proceeds from the fleet sale will reduce debt by $170 million, with much of the remaining proceeds to be used for general corporate purposes including growth. The agency said that while reported debt balances will be lower following the sale, the re-chartering of 11 vessels will increase rental expense, with a net impact on reported fiscal 2007 EBITDA of negative $12 million.

Chiquita's ratings could be downgraded if its earnings and cash flow remain weak or in the event that its liquidity becomes constrained, Moody's said. Specifically, Chiquita's ratings could be downgraded if the debt-to-EBITDA ratio rises above 8x on a last-12-months basis or if the EBIT-to-interest ratio falls below 0.7x on a last-12-months basis.

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