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RJR NABISCO COMMERCIAL PAPER UPGRADED TO 'F-2', REMOVED FROM FITCHALERT -- FITCH FINANCIAL WIRE --

RJR NABISCO COMMERCIAL PAPER UPGRADED TO 'F-2', REMOVED FROM FITCHALERT
 -- FITCH FINANCIAL WIRE --
 NEW YORK, Aug. 10 /PRNewswire/ -- RJR Nabisco, Inc.'s commercial paper program is upgraded to 'F-2' from 'F-3' and removed from FitchAlert positive, where it was placed on June 24 following a Supreme Court decision in a tobacco-related case. The company's $5.9 billion 'BBB' senior debt and $3.3 billion 'BBB-' subordinated debt are affirmed. RJR Nabisco Holdings Corp.'s $424 million senior converting debentures and $100 million preferred stock also are affirmed at 'BBB-'. Approximately $420 million of commercial paper is outstanding. The credit trend is improving.
 The upgrade follows the decision by the US Supreme Court in Cipollone v. Liggett, et. al., in which the Court largely affirmed the tobacco industry's most important defense of preemption of state law- based health injury claims.
 The ratings reflect the substantial improvement in financial condition since the early 1989 leveraged buyout, the magnitude, stability, and predictability of RJR's cash flow, the company's demonstrated ability to access the public and private debt and equity markets even under adverse market conditions, and management's intention to continue to improve credit quality over the next several years.
 Since the buyout, RJR has reduced total debt from $29 billion to less than $14 billion. Additionally, the company's ongoing program of repurchasing high coupon debt has slashed its average borrowing costs from 12.75 percent to 9.1 percent over the same period and considerably extended debt maturities, which now average only about $200 million annually over the next five years. This leaves a substantial annual free cash flow cushion of some $1.5 billion, even after allowing for approximately $500 million of annual capital expenditure requirements.
 Contributing to the debt reduction have been $5.8 billion of asset sales, $3.7 billion of public and private common equity infusions, and a highly successful cost reduction plan which reduced annual operating expenses by approximately $500 million. The new management team dramatically improved operating earnings, to $3.5 billion in 1991 from $2.4 billion in 1988, the year prior to the buyout. Although total debt to capitalization is still comparatively high at 63 percent on a GAAP basis, this ratio is expected to show considerable improvement over the next several years.
 Mitigating some of the positive financial factors is the continuing domestic trend toward generic cigarettes. This trend will continue to be a source of margin erosion for the domestic tobacco industry. However, the company has been successful in entering into several promising ventures in international markets where consumption is growing. Also, the company's Nabisco Foods Group, which had a difficult first half for sales, is expected to benefit from a flurry of new product introductions in the latter half of 1992.
 RJR is the second largest tobacco company in the United States, and, through its Nabisco Foods Group, ranks as one of the world's largest packaged foods companies.
 -0- 8/10/92
 /CONTACT: For more rating or legal information, call Thomas W. Hoens, 212-908-0569, or Leah W. Murch, Esq., 212-908-0511, both of Fitch/ CO: RJR Nabisco, Inc. ST: IN: FOD SU: RTG


SH -- NY064 -- 8603 08/10/92 15:08 EDT
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Date:Aug 10, 1992
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