Moody's to review Dean Foods ratings |
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Fri, 02 Mar 2007 22:36
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NEW YORK (AP) - Moody's ratings service said Friday it is placing the ratings of milk producer Dean Foods on review for a possible downgrade after the company announced a special dividend as part of a recapitalization.Dean Foods said it will shift its balance sheet to debt capital from equity capital by taking on $4.8 billion in new debt through the sale of senior secured credit. The debt will be used to finance the special $15 dividend, which will cost the company about $2 billion.Moody's also assigned a prospective rating of 'Ba3' to the new credit facility.The company currently holds 'Ba1' corporate family and probability of default ratings. Its senior unsecured credit rating is now 'Ba2'. All three ratings are speculative grade.'Because the special dividend will significantly increase leverage in the short-term and represents a shift to a more aggressive financial policy, the likely outcome of the review is for a two-notch downgrade of the corporate family and probability of default ratings to 'Ba3' and of the senior unsecured ratings to 'B1',' the ratings service said. 'This rating outcome would reflect the significant leverage that Dean Foods will be taking on to fund the proposed return to shareholders.'Moody's said it expects to complete the review when the new bank facility closes and the dividend is funded. Dean Foods plans to pay the dividend April 2.Earlier in the day, Standard and Poor's ratings service lowered the company's credit ratings to 'BB' from 'BB+'.The downgrade and the Moody's review didn't stop shareholders from pushing up the price of the stock. Shares rose $1.64, or 3.6 percent, to close at $47.03 in very heavy trading on the New York Stock Exchange. The shares reached a 52-week high of $50.50 earlier in the day. The stock has traded between $34.66 and $46.39 during the past year.Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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