Tyson Foods stock tumbles as debt cut to junk

CHICAGO Wed Jun 18, 2008 4:19pm EDT

CHICAGO (Reuters) - Shares of Tyson Foods Inc (TSN.N) fell more than 8 percent in New York Stock Exchange trading on Wednesday after Fitch Ratings cut the U.S. meat producer's debt rating to junk status.

Fitch said it anticipates lower-than-expected earnings for the producer of beef, pork and chicken as it struggles to pass on higher feed costs.

Fitch cut Tyson's issuer default rating one notch to "BB-plus," one step below investment grade, from "BBB-minus." The outlook is negative.

"None of the Tyson credit agreements are affected by the action ... Market conditions are very challenging, specifically record high corn prices," Tyson said in a statement. "We continue to work on optimizing our operations and managing through rising grain and fuel costs."

Tyson said its chicken business is being hit the hardest by the higher input costs but "we remain confident in our business model, which includes beef, pork and prepared foods."

"The downgrade reflects expectations that Tyson's credit statistics will continue to deteriorate in the near term due to lower-than-anticipated operating earnings and cash flow," Fitch said in a statement.

It said higher-than-predicted grain costs and the length of time required to pass them on through pricing is reducing profitability of the company's poultry operations, which often generates a significant portion of the company's cash flow, Fitch said.

Tyson shares closed down $1.22, or 8.2 percent, to $13.68, their lowest close since February.

(Reporting by Bob Burgdorfer, editing by Mark Porter)

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