S&P Assigns 'BBB-' Corp. Rating to Kraft Heinz (KHC); Outlook Positive

Standard & Poor's Ratings Services today assigned its 'BBB-' corporate credit rating to Kraft Heinz (Nasdaq: KHC). At the same time, we removed all of our ratings on both the H.J. Heinz Co. and Kraft Foods Group Inc. from CreditWatch, where they had been placed with positive implications for Heinz and negative implications for Kraft on March 25, 2015, following the companies' merger announcement. The outlook is positive.

We also raised the ratings on Heinz's roughly $3.1 billion rollover debt tranches to 'BBB-' and withdrew the recovery ratings on the following issues:

• 4.875% secured notes due Feb. 15, 2025;
• 6.25% GBP secured notes due Feb. 18, 2030;
• 2% unsecured notes due Sept. 12, 2016;
• 1.5% unsecured notes due March 1, 2017;
• 3.125% unsecured notes due Sept. 12, 2021;
• 2.85% unsecured notes due March 1, 2022;
• 6.375% unsecured notes due July 15, 2028;
• 6.75% unsecured notes due March 15, 2032; and
• 7.125% unsecured notes due Aug. 1, 2039.

We also lowered the following issue-level ratings on Kraft's $8.6 billion rollover debt tranches to 'BBB-':

• 2.25% unsecured notes due June 5, 2017;
• 6.125% unsecured notes due Aug. 23, 2018;
• 5.375% unsecured notes due Feb. 10, 2020;
• 3.5% unsecured notes due June 6, 2022;
• 6.875% unsecured notes due Jan. 26, 2039;
• 6.5% unsecured notes due Feb. 9, 2040; and
• 5% unsecured notes due June 5, 2042.

We withdrew the stand-alone corporate credit ratings on the H.J. Heinz Co. and Kraft Foods Group Inc. Prior to the withdrawal, we raised the rating on the H.J. Heinz Co. to BBB-/Positive from BB-/Watch Neg and lowered the rating on Kraft Foods Group Inc. to BBB-/Positive from BBB/Watch Neg. Concurrently, we withdrew Kraft's 'A-2' short-term and commercial paper ratings. We withdrew
the issue-level and recovery ratings on Heinz's $6.4 billion B-1 and B-2 term loans, $3.1 billion 4.25% second lien notes, and $2 billion revolver.

"Our rating on the newly formed combined company reflects our view that it will benefit from increased scale and diversity and possibly experience industry-leading operating margins," said Standard & Poor's credit analyst Bea Chiem. "The ratings and outlook are underpinned by the company's participation in a low-growth industry and its substantial leverage, as well as our expectation that 3G will execute on its cost savings program and maintain a financial policy consistent with an investment-grade rating, including maintaining leverage below 4x."

Reflecting the company's recent debt issuances, we estimate the new company's funded debt is roughly $32.5 billion (including $8 billion of preferred stock treated as 100% debt). We estimate the company's adjusted net debt of roughly $32 billion, reflecting pro forma cash, capitalized operating leases, and unfunded pension and postretirement benefit obligations.

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