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Fitch Affirms Altria's IDR at 'BBB+'; Downgrades UST Sr. Notes to 'BBB+'

  //house-home.news-articles.net/content/2009/01/0 .. s-idr-at-bbb-downgrades-ust-sr-notes-to-bbb.html
  Published in House and Home on Tuesday, January 6th 2009 at 14:54 GMT, Last Modified on 2009-01-06 14:55:22 by Market Wire

CHICAGO--([ BUSINESS WIRE ])--Fitch Ratings has taken the following rating actions on the Issuer Default Ratings (IDRs) and outstanding debt ratings of Altria Group, Inc. (Altria) (NYSE: MO), Philip Morris Capital Corp. (PMCC; a wholly-owned subsidiary of Altria), and UST Inc. (UST; a wholly-owned subsidiary of Altria):

Altria

--IDR affirmed at 'BBB+';

--Guaranteed bank credit facilities affirmed at 'BBB+';

--Guaranteed senior unsecured debt affirmed at 'BBB+';

--Short-term IDR affirmed at 'F2'

--Commercial paper (CP) affirmed at 'F2'.

Philip Morris Capital Corp

--IDR affirmed at 'BBB+';

--Senior unsecured debt affirmed at 'BBB+';

--Short-term IDR affirmed at 'F2';

--CP affirmed at 'F2'.

UST

--IDR of 'A' withdrawn;

--Bank credit facility of 'A' withdrawn;

--Short-term IDR of 'F1' withdrawn;

--CP of 'F1' withdrawn;

--Senior unsecured debt downgraded to 'BBB+' from 'A'.

The Rating Outlook is Stable.

Today Altria announced it completed the acquisition of UST, valued at $11.7 billion including the assumption of approximately $1.3 billion of UST debt. Altria will fund the acquisition with $6.8 billion of senior unsecured notes issued since the announcement of the acquisition on Sept. 8, 2008 and borrowings of approximately $4.3 billion under its 364-day credit facility. For the twelve months ended Sept. 30, 2008, Altria's credit statistics on a pro-forma basis were in line with Fitch's expectations. Total debt-to-operating earnings before interest, taxes, depreciation and amortization (EBITDA) was approximately 2.2 times (x), operating EBITDA-to-gross interest expense was about 4.8x, and operating EBITDA margin was roughly 27.3%.

While debt levels will increase significantly as a result of the transaction, Fitch expects leverage to improve to approximately 2.0x within the near term as the company tempers share repurchases and utilizes discretionary cash flow to reduce debt. Furthermore, Philip Morris USA, Inc., a wholly-owned operating subsidiary of Altria, has guaranteed Altria's credit agreements and senior unsecured notes. In addition to the moderation in share buybacks, Altria has a number of options to improve its credit metrics. The company could monetize a portion of its 28.5% equity stake in SAB Miller, or it could possibly divest itself of other non-tobacco assets and utilize the proceeds to reduce debt.

Fitch downgraded the senior unsecured debt rating of UST to 'BBB+' to reflect the overall credit profile of Altria. Fitch has withdrawn the long-term and short-term IDRs of UST along with the bank credit facility and CP ratings, as Fitch does not expect Altria to issue additional debt at the UST subsidiary level.

For further information, please review Fitch's press release, 'Fitch Affirms Altria's IDR at 'BBB+'; Outlook Revised to Stable,' dated Sept. 8, 2008.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, [ www.fitchratings.com ]. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.