Moody's ups Tyson debt to Ba1, rates notes Ba3

Moody's Investors Service said it assigned a Ba3 rating (LGD4, 52%) to the proposed $500 million senior unsecured guaranteed notes due 2014 to be issued by Tyson Foods, Inc. under Rule 144A.

The agency also upgraded the ratings of Tyson's $1 billion senior secured first-lien bank revolving credit agreement, guaranteed by material operating subsidiaries, to Ba1 (LGD2, 21%) from Ba2 (LGD2, 27%) and senior secured industrial revenue bonds, guaranteed by Tyson Foods, Inc., to Ba1 (LGD2, 21%) from Ba2 (LGD2, 27%).

Affirmed were the company's corporate family and probability-of-default ratings of Ba3, $960 million senior unsecured notes due 2016, guaranteed by Tyson Fresh Meats, Inc., at Ba3 (LGD4, 52% from 54%) and senior unsecured unguaranteed debt at B2 (LGD5, 85%) and its speculative grade liquidity rating of SGL-4.

Moody's said it expects to upgrade Tyson's speculative grade liquidity rating to SGL-3 if the company completes the proposed notes issue and replaces its $1 billion revolving credit with a new unrated asset based revolving credit agreement.

The outlook remains negative.

"The establishment of an ABL to replace its existing revolving credit agreement is a significant improvement in Tyson's capital structure," Elaine Francolino, a Moody's vice president, said in a statement. "Covenants and a rating trigger will be replaced by a financial test that will not be in effect unless usage exceeds a high threshold that is unlikely to be crossed, in Moody's view."

The upgrade on the company's first-lien debt reflects the lower level of priority accounts payable in the liabilities waterfall, given capacity reductions, the sale of the Canadian beef business and more modest feed-grain prices, Moody's said.

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