Fitch cuts Tyson, rates loans BB+, notes BB

Fitch Ratings said it downgraded the Tyson Foods, Inc.'s long-term issuer default rating to BB from BB+, senior unsecured notes due 2011 to BB- from BB, convertible senior notes due 2013 to BB- from BB, senior unsecured notes due 2016 to BB from BB+, senior unsecured notes due 2018 to BB- from BB and senior unsecured notes due 2028 to BB- from BB.

The agency downgraded Tyson Fresh Meats, Inc.'s senior secured notes due 2010 to BB+ from BBB- and senior secured notes due 2026 to BB+ from BBB-.

Fitch also assigned Tyson's proposed three-year asset-based loan facility maturing in 2011 at BB+ and five-year senior unsecured notes due 2014 BB.

The outlook is stable.

According to the agency, the downgrade is due to $112 million of consolidated net losses during the most recent quarter ended Dec. 27 and expectation that a substantial portion of $168 million of grain related hedging losses and $20 million of negative non-cash inventory adjustments will be realized in the near-term.

Tyson continues to benefit from stronger than normal performance in its pork segment and improved year-over-year performance in beef, the agency said, but the magnitude of losses in its chicken segment were greater than Fitch had anticipated and Tyson remains free cash flow negative.

Tyson's new ratings reflect the high level of business risk and volatility inherent in the protein industry and expectations that absent any unexpected disruptions in the protein industry, Tyson can achieve credit statistics suitable for the new rating level in intermediate term, the agency said.

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