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Moody's reviews Kellogg's Baa1 rating for downgrade

Staff writer |
Moody's Investors Service placed the Baa1 long-term senior unsecured debt rating of Kellogg Company under review for possible downgrade.

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This follows Kellogg's recent weaker-than-expected operating performance, especially in US cereals and snacks, and its announcement of a costly restructuring plan that likely will not allow for further debt reduction in the near future. Moody's affirmed the company's Prime-2 short-term rating.

The review, — including its recently announced "Project K" that will cost the company between $1.2 billion and $1.4 billion over the next four years — and its likely effect on operating stability and credit metrics that have been week since last year's Pringles acquisition.

Moody's also will revisit the future growth and profitability prospects of the global ready-to-eat (RTE) cereal category that continues to decline in key geographies including North America, Europe and Asia. Finally, the review will consider Kellogg's future financial policy as it relates to shareholder distributions, which the company has said could contribute to higher debt levels over the next three years.

"We expected that Kellogg would face difficult operating challenges over the past year, especially in US cereal, but overall results have been below our expectations," commented Brian Weddington, a Moody's analyst.

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