S&P rates General Mills BBB+

Standard & Poor's assigned a BBB+ rating to General Mills Inc.'s new $1.35 billion zero-coupon convertible senior debentures due 2022. The outlook is stable.

The ratings reflect historically strong profitability and cash flow, partially offset by a relatively weak financial profile for the rating, S&P said.

On Oct. 31, 2001, General Mills completed the acquisition of Pillsbury from Diageo plc for a total consideration of $10.4 billion, including the assumption of $4.5 billion in debt. The acquisition weakened General Mills' financial profile but strong cash flows should allow it to strengthen ratios over time.

In April, S&P lowered the corporate credit rating on General Mills, believing that after the Pillsbury acquisition, debt reduction in the short term would be below previous expectations.

The revised debt reduction target follows General Mills' anticipation of weaker operating performance in fiscal 2003 due to lower retail volumes, softer food service sales, and fewer new product introductions, S&P said.

Earnings softness is expected to delay General Mills' debt-reduction plans, as the company refocuses spending on product promotions and less on debt reduction.

Rolling 12-month pretax interest coverage at Aug. 25 was 2.7x and total debt to EBITDA was 4.9x.

At Aug. 25, General Mills had $745 million of cash and short-term investments, and $4 billion in committed lines with 75% due in January 2003 and the remainder in January 2006.

Liquidity should continue to be adequate, with ample availability under facilities to meet near-term maturities and financial ratios remain well within the financial covenants, S&P said.

Expected benefits from the Pillsbury acquisition should enable the company to improve credit measures to levels more appropriate for the current rating in the intermediate term.

Fitch rates General Mills BBB+

Fitch Ratings assigned a rating of BBB+ to General Mills Inc.'s proposed $1.35 to $1.5 billion 20-year zero coupon convertible debentures due 2022. The outlook is negative.

This transaction is viewed as neutral to modestly positive, Fitch said.

While the refinancing will not have a significant effect on credit statistics, it will extend maturities for up to $1.5 billion of debt, reducing short-term liquidity risk and refinancing risk.

Total debt-to-EBITDA was about 5.4x and EBITDA-to-interest around 3.2x for the 12 months ended Aug. 25.

Although credit statistics are weak for the rating, they are expected to improve through improved operating performance and debt reduction in the near-to-intermediate term, Fitch said.

Moody's amends New World Infrastructure review

Moody's Investors Service changed the rating review on New World Infrastructure Ltd.'s 1% convertible bond due 2003 (Ba3) from possible downgrade to direction uncertain, following the announcement made by the New World regarding its corporate reorganization.

Moody's said it understands New World intends to fully repay the $170 million convertible with a bridge loan arranged by Pacific Ports Co. Ltd., but it is yet to be finalized.

Also, Moody's noted the reorganization is subject to, among other things, shareholder approvals.

On finalizing the financing, Moody's said the rating is likely to be placed on review for upgrade or upgraded.

Should the financing not occur, Moody's said the rating will be put back on review for possible downgrade.

Moody's affirms AIG ratings

Moody's Investors Service confirmed the ratings of American International Group, Inc. (senior unsecured debt, Aaa) with a stable outlook, as well as its subsidiaries.

The affirmation is based on the organization's ability to sustain overall exceptional franchise strength and financial profile during a period of pronounced stress, Moody's said.

Moody's noted that AIG has by no means been immune to a difficult competitive environment in its major business segments and credit-related challenges facing financials.

The rating agency added, however, that it continues to see such challenges as manageable for AIG at its current rating level, given its diversified sources of earnings and cash flow, strong capitalization and ability to benefit from a pronounced flight to quality in some of its more credit-sensitive businesses.

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