Nabisco's $900M Notes Rated 'BBB' by S&P.NEW YORK--(BUSINESS WIRE)--Jan. 14, 1998--NY--Standard & Poor's CreditWire 1/14/98--Standard & Poor's today assigned its triple-'B' rating to Nabisco Inc.'s $300 million notes due Feb. 15, 2011; $300 million notes due Feb. 1, 2033; and $300 million notes due Feb. 1, 2035. Each series of notes are putable or callable Callable Applies mainly to convertible securities. Redeemable by the issuer before the scheduled maturity under specific conditions and at a stated price, which usually begins at a premium to par and declines annually. on a single date: Feb. 15, 2001; Feb. 1, 2003; and Feb. 1, 2005, respectively. The notes are being drawn down from Nabisco's $1 billion Rule 415 shelf registration. At the same time, Standard & Poor's affirmed its triple-'B' corporate credit, bank loan, and senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. ratings, and 'A-2' commercial paper rating on the company. About $4.6 billion of total debt is outstanding. Nabisco's ratings reflect the company's low business risk derived from U.S. cookie and cracker market dominance Market dominance is a measure of the strength of a brand, product, service, or firm, relative to competitive offerings. There is often a geographic element to the competitive landscape. , good free cash-generating ability, solid coverage ratios, and moderate financial policy. Nabisco has about a 41% share in the U.S. cookie market and about a 57% share in the U.S. cracker market -- more than twice the size of its nearest competitor. The company's success has been driven by new product introductions, productivity gains, a superior distribution network, strategic acquisitions, and increased international market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" . However, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. growth slowed dramatically beginning in 1995 as a result of rising cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold and production inefficiencies caused by the company's high level of new product activity. In June 1996, Nabisco announced a restructuring program designed to improve the company's competitive position and reinvigorate earnings growth. Earnings before interest, taxes, depreciation, and amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. coverage of interest expense is solid, at about 4.2 times (x) in 1996 and 4.3x for the first nine months of 1997, up from 3.9x for the first nine months of 1996. Interest coverage is expected to continue to increase modestly in the near term, driven by earnings growth. The restructuring activities announced in 1996 are beginning to improve the firm's cost structure, and the incremental cash generated likely will be used for brand-building activities rather than debt reduction. Bank covenants limiting intercompany loans and dividend payments, significant public ownership, and the company's independent borrowing status are key factors enabling Standard & Poor's to distinguish Nabisco's ratings from those of RJR Nabisco Inc. (triple-'B'-minus corporate credit rating, on CreditWatch with negative implications). However, as long as Nabisco's ownership remains controlled by RJR RJR R.J. Reynolds RJR Thorny Skate (FAO fish species code) , the ratings of the two entities will be closely linked. RJR holds an 80.5% economic and about a 97.6% voting interest in Nabisco's parent, Nabisco Holdings. OUTLOOK: NEGATIVE The negative outlook reflects the linkage between Nabisco's ratings and those of RJR Nabisco. While a modest downgrade of RJR Nabisco's rating would not necessarily result in a downgrade of Nabisco, a more significant downgrade of RJR Nabisco's ratings likely would have a negative impact on Nabisco's ratings.---CreditWire CONTACT: Pamela L Atkins, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (1) 212-208-8343 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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