Moody's: National Beef outlook stable

Moody's Investors said it changed the outlook of National Beef Packing Co., LLC to stable from negative, based on significant improvement in operating performance and credit metrics in fiscal 2008.

The company's B2 corporate family and probability-of-default ratings, and $160 million 10.5% senior unsecured notes due 2011 at Caa1 (LGD5, 90% from 86%) were affirmed.

In the fiscal year ended Aug. 30, stronger customer demand allowed for increased selling prices, sales and earnings benefited and some commodity costs moderated, according to the agency.

The better operating environment resulted in a significant decline in leverage, with debt-to-EBITDA ratio dropping to 3 times in fiscal 2008 from 6.1 times in fiscal 2007.

The affirmation incorporates expectation that operating cash flow and profit margins will remain appropriate for its rating category despite likely smaller cattle supplies constraining margins over the next few years and weaker global consumer demand in this recession, Moody's said.

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