Moody's cuts Del Monte liquidity to SGL-2

Moody's Investors Service said it downgraded Del Monte Foods Co.'s speculative grade liquidity rating to SGL-2 from SGL-1 due to the scheduled tightening of financial covenants in July 2005.

Moody's also affirmed Del Monte's Ba3 senior implied rating and stable outlook.

Moody's said it expects Del Monte to generate significant free cash flow over the next 12 months, which the company could direct to term debt repayment, share repurchases, and/or acquisitions. Due to seasonality, the company relies on its revolver on an interim basis during the year, with utilization typically at a low in May/June and peaking in September/October, during the harvest and packing season, after which utilization quickly decreases.

Del Monte's $300 million revolving credit commitment provides an adequate cushion of unused revolver availability to meet peak working capital needs.

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