Moody’s Affirms Tyson Credit Rating

Moody’s Investors Services affirmed Tyson Foods’ corporate credit rating at one notch below investment grade – Ba1 – but revised the meat giant’s rating outlook from stable to to positive on Wednesday (March 14).

The positive outlook reflects Moody's expectation that Tyson should be able to sustain moderate leverage and strengthen its liquidity profile over the next 12 — 18 months, which could lead to an upgrade.

The revision also takes into consideration that the protein industry could experience challenges over the next year, especially in chicken and beef that combined represent over 75% of Tyson's sales.

"Given the amount of debt Tyson has recently paid down, leverage is currently less of a concern than it has been in the past," said Brian Weddington, a Moody's VP-Senior Credit Officer. "As we move through this period when we expect that two of the three main proteins are likely to generate below-average earnings, leverage should remain reasonably low, but Tyson may need to further strengthen its liquidity profile to warrant an upgrade," added Weddington

The speculative rating on Tyson’s liquidity profile reflects the company's $857 million cash balance at the end of December 2011, anticipated positive free cash over the next 12 months, and approximately $855 million of availability under its revolving credit facility that has financial covenants that are not currently restrictive, although they could be in the event of severe earnings volatility.

The two other major rating firms – Standard and Poors and Fitch – have already upgraded Tyson Foods to investment grade earlier this year.