Moody's rates Reynolds American loan Ba1, notes Ba2

Moody's Investors Service said it has assigned a rating of Ba1 to Reynolds American Inc.'s new $2.05 billion senior secured bank facilities, consisting of a $1.55 billion six-year senior secured term loan and a $500 million five-year senior secured revolver, and assigned a Ba2 rating to the $1.650 billion of new senior secured notes.

Moody's also said it placed the existing ratings for RJ Reynolds Tobacco Holding Co.'s senior secured debt on review for possible downgrade. In addition, Moody's has withdrawn the SGL-3 speculative grade liquidity and Ba2 corporate family ratings from RJ Reynolds and assigned an upgraded SGL-2 speculative grade liquidity and Ba2 corporate family to Reynolds American.

The outlook is negative.

Moody's said the key rating driver of the Ba2 corporate family rating is the substantial tobacco litigation risk confronting the company and the other U.S. cigarette producing companies. Moody's said it recognizes that the acquisition of Conwood makes strategic sense given its higher operating margins and its positive impact on Reynolds' product diversification within the tobacco industry.

However, the negative outlook reflects the temporary uncertainty surrounding the integration of Conwood into its existing operations, the agency said.

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