Moody's lowers Tyson Foods to SGL-3

Moody's Investors Service said it lowered the speculative-grade liquidity rating of Tyson Foods, Inc. to SGL-3 from SGL-2.

The agency also affirmed the company's corporate family and probability-of-default ratings at Ba1, its $1 billion senior unsecured bank credit agreement and $1 billion 6.06% senior unsecured notes due 2016 at Ba1 (LGD3, LGD% changed to 45% from 44%) and its senior unsecured unguaranteed debt at Ba2 (LGD5, LGD% changed to 87% from 88%).

Also affirmed were the Ba1 (LGD3, LGD% changed to 45% from 44%) senior unsecured debt ratings of Tyson Fresh Meats, Inc. and Lakeside Farms Industries Ltd. and the Baa2 (LGD2, LGD% changed to 18% from 15%) senior secured industrial revenue bonds of Tyson Foods and Tyson Fresh Meats.

The outlook remains negative.

The agency said the SGL-3 rating is based on the expectation that higher commodity costs will pressure profitability and free cash flow over the next 12 months and anticipates a likely heavier reliance on borrowings under committed credit facilities to fund at least a portion of working capital needs and/or capital expenditures over the next 12 months.

The affirmation of Tyson's long-term ratings reflects Moody's expectation that credit metrics will remain appropriate for the company's rating level.

The negative outlook reflects the agency's view that the high cost of corn and other inputs will continue to pressure margins in beef and chicken and credit metrics in fiscal 2008 are likely to trail those of fiscal 2007.

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