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Fitch: Heinz on positive watch
Fitch Ratings said it placed the ratings on H.J. Heinz Co. and its subsidiaries on Rating Watch positive following a definitive merger agreement with Kraft Foods Group to form the Kraft Heinz Co. in a stock-for stock transaction.
The ratings on positive watch include Heinz’s long-term issuer default rating of BB-, first-lien secured credit facilities rating of BB+, second-lien secured notes rating of BB and senior unsecured notes rating of BB-.
Also on positive watch include H.J. Heinz Holding Corp.’s long-term issuer default rating of BB-, H.J. Heinz Co.’s long-term issuer default rating of BB- and H.J. Heinz Finance Co.’s senior unsecured notes rating of BB-.
H.J. Heinz Finance UK plc’s second-lien secured notes rating of BB also was placed on positive watch.
Kraft shareholders will own 49% and Heinz shareholders, primarily 3G Capital and Berkshire Hathaway, will own 51% of the combined entity, Fitch said.
In addition, Kraft’s shareholders will receive a cash payment of $16.50 per share, or about $10 billion, funded by 3G and Berkshire, the agency said.
The combined debt levels post the merger is not expected to increase, Fitch said.
The transaction is expected to close in the second half of 2015 and is subject to approval by Kraft’s shareholders and customary regulatory approvals.
The positive reflects the projected decrease in financial leverage for the combined company versus Heinz’s total debt-to-EBITDA ratio of 6.2x on a stand-alone basis.
Fitch said it estimates that initial pro forma leverage will be in the mid-4x range based on 2014 debt of $31.3 billion and EBITDA of $6.6 billion.
The ratings incorporate significant qualitative benefits from the company’s owners, 3G and Berkshire, the agency added.
Both have significant financial strength and are proven operators, Fitch said.
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