Fitch rates Altria notes BBB+

Fitch Ratings said it assigned a BBB+ rating to Altria Group, Inc.'s senior note offering.

The outlook is stable.

Proceeds will be used to pay down a portion of the company’s currently outstanding $682 million of 9.95% notes due 2038 and $718 million of 10.2% notes due 2039, through an "any and all" tender offer that is set to expire on Sept. 16, unless extended. Any remaining proceeds are expected to be used for other general corporate purposes, including voluntary contributions to Altria's pension plans.

The ratings apply to about $13 billion of debt at June 30.

Fitch said the secular cigarette decline in the U.S., typically in the range of 3% to 4% per year, decelerated to less than 1% during 2015, but will likely return closer to historical levels by 2017.

In addition, Altria should continue to generate strong EBITDA margins in the high 40%'s, even as volume declines resume and pricing improvement moderates due to fewer macroeconomic tailwinds.

The agency explained that the company’s shareholder-friendly posture is expected to continue through the ratings horizon, including dividend payouts around 80% (of adjusted EPS) supplemented with active share repurchasing. Fitch sees the strategy as manageable at current cash flows and with leverage (total debt to EBITDA) consistently sustained below 2 times.

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