Fitch upgrades R.J. Reynolds

Fitch ratings said it upgraded R.J. Reynolds Tobacco Holdings, Inc.'s issuer default rating to BBB- from BB, guaranteed unsecured notes to BB+ from BB and senior unsecured notes to BB+ from BB-.

The outlook is stable.

The agency said the upgrade reflects a decline in litigation risk, specifically that parent company Reynolds American Inc. would not have to pay a material financial judgment in the near term. The ratings are also supported by the continued high profitability and strong cash flow generation of the U.S. tobacco industry.

These positive elements are balanced by the high level of competitiveness in the industry, low single-digit cigarette volume decline and ongoing, albeit currently manageable, litigation risk, Fitch said.

For the last 12 months ended March 31, Reynolds American's total debt-to-EBITDA ratio was 2.1x.

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