Fitch waiting on Kraft spin-off |
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Thu, 01 Feb 2007 20:49
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NEW YORK (AFX) - Fitch Ratings said Thursday it would not take any immediate action following tobacco company Altria Group Inc.'s decision to spin-off food maker Kraft Foods Inc. but said it views the deal as favorable to both companies.Altria announced the spin-off Wednesday after years of waiting. The company holds an 89 percent majority stake in the food maker. Altria shareholders will receive about 0.7 of a share of Kraft for every one share of Altria with the exact ratio determined on the date of the spinoff.Fitch said the removal of Kraft from Altria's umbrella will allow the service to rate the food maker based on its own merits and will not be dragged down by the litigation risk carried by Altria, which makes the top-selling Marlboro cigarette brand.'Kraft will benefit from being a completely independent company with no association to the tobacco companies owned by Altria,' the service said. 'Kraft's credit metrics are slightly stronger than the current rating level would indicate.'For Altria, Fitch said the company will benefit from severing its association with Kraft, which has struggled with declining margins and a lack of predictable growth.'Credit ratings for Altria are at a lower level than the credit measures indicate due to the ongoing, albeit reduced, tobacco litigation risk,' the service said. 'Altria's credit metrics will strengthen further upon the spin-off of Kraft and margins will be significantly higher.'New York-based Altria has a senior unsecured debt rating and credit facility rating of 'BBB+'. Northfield, Ill.-based Kraft Foods, meanwhile, has a senior unsecured debt rating and credit facility rating of 'A-'.Fitch said it will review its ratings for possible upgrades after it meets with both companies.Kraft shares fell $1.01 to $33.91 in afternoon trading. Altria shares fell 3 cents to $87.36. Both stocks trade on the New York Stock Exchange.Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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