January 19, 2007

Pilgrim's Pride credit rating downgraded after purchase of Gold Kist

Saying that chicken products company Pilgrim's Pride's purchase of former rival Gold Kist increased the company's debts and that it would have difficulty integrating its purchase, Moody's Investors Service downgraded the chicken processor's credit ratings Tuesday (Jan 16).

While the acquisition makes strategic sense and is a good addition to Pilgrim's portfolio, the transaction would add a significant amount of leverage to the company and at a time when Pilgrim's earnings have been under a lot of pressure, said Moody's vice president Peter Abdill.

Moody's downgraded the company's senior unsecured credit rating to "B1" from "Ba3", its senior subordinated notes to "B2" from "B1" and its corporate family ratings to "Ba3" from "Ba2." Moody's also assigned a "B1" rating to the company's planned new $250 million senior unsecured notes and a "B2" to its new $200 million senior subordinated notes.

The change comes after the company said it would acquire Gold Kist for $1.1 billion in cash plus the assumption of Gold Kist debt.

Moody's said the company has been affected by narrow product mix, highly volatile earnings stream and history of periodic debt-financed acquisitions.