Banking & Finance

Top Debt & Credit Rating Agency Actions (MCD, CRH, CHK, WFC, TXN, CTL, EK, CODI)

Today’s ratings actions start of with a real no-brainer. McDonald’s Corp. (NYSE: MCD) received an ‘A’ rating from Fitch Ratings on a new $500 million 2.625%, 10.25-year senior unsecured note due January 2022. McDonald’s rating outlook is stable. Proceeds from the offering will be used for general corporate purposes, which may include refinancing of debt. With nearly 33,000 stores world-wide and $1.6 billion in free cash flow, McDonald’s is about as safe a borrower as there is.

Other companies getting in on the ratings action include CRH PLC (NYSE: CRH), Chesapeake Energy Corp. (NYSE: CHK), Wells Fargo & Co. (NYSE: WFC), Texas Instruments Inc. (NYSE: TXN), CenturyLink Inc. (NYSE: CTL), Eastman Kodak Co. (NYSE: EK), and Compass Diversified Holdings (NYSE: CODI).

CRH PLC (NYSE: CRH) received an affirmation of its ‘BBB’ senior unsecured rating  with a stable outlook from Fitch. CRH is a building materials company based in Ireland that also operates in the US. The company’s market cap is more than $11 billion. HSBC recently upgraded the stock from ‘Underweight’ to ‘Neutral’.

Chesapeake Energy Corp. (NYSE: CHK) received ratings from Standard & Poor’s on $350 million of floating-rate, asset-backed notes. The Class A senior note ($326.75 million) received a ‘AAA’ rating; the Class B subordinated note ($12.05 million) received a ‘AA’ rating; and the Class C subordinated note ($11.2 million) received an ‘A’ rating. The coverage amount on the Class A note is 13.96%, falling to 9.90% on the Class B note and 6.39% on the Class C note. The backing for the notes includes beneficial interest in lease contracts, related vehicles, and fleet receivables.

Wells Fargo & Co. (NYSE: WFC) subsidiary Wachovia Bank received lowered ratings on 10 commercial mortgage backed securities classes from S&P. Eleven other classes in the mortgage trust series had ratings re-affirmed. S&P based the downgrade on the fact five of the pool’s assets, worth $48.9 million, are in the hands of a special servicer. Three of the properties are in foreclosure, one is 30-days delinquent, and only one is current.

Texas Instruments Inc. (NYSE: TXN) has completed its acquisition of National Semiconductor and S&P withdrew its corporate credit rating on National Semi and replaced it with Texas Instruments’ ‘A+’ rating with a stable outlook.

CenturyLink Inc. (NYSE: CTL) subsidiary Qwest has received a ‘BBB-‘ rating on $950 million in senior notes due 2021. Qwest will add the proceeds to net proceeds of $557 million from a recent issue of notes due in 2051 to redeem $1.5 billion in notes due next year. CenturyLink’s corporate credit rating remains at ‘BB’ and its outlook is stable. The Qwest acquisition makes CenturyLink the third-largest wireline phone carrier in the US.

Eastman Kodak Co. (NYSE: EK) received a downgrade on all its ratings from Moody’s following its drawdown of $160 million from its corporate revolving credit facility of $400 million. Moody’s concludes that the drawdown signals weaker cash flow and that the company will consume cash next year, hurting Kodak’s liquidity. The corporate famil rating was downgraded from ‘Caa2’ to ‘Caa3’. Outstanding debt was also downgraded one or two notches.

Compass Diversified Holdings (NYSE: CODI) received a downgrade on its speculative grade liquidity rating from Moody’s. The rating dropped from ‘SGL-2’ to ‘SGL-3’ due to a recent acquisition which Compass paid for from its revolving credit facility. The company is expected to refinance the debt with longer term debt, and Moody’s said that it would likely revert to the higher rating if that happens. Compass owns a stable of nine companies and pays a very high dividend yield of 11.5%.

Paul Ausick

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