TEXT-S&P rates Lorillard's notes 'BBB-'
Aug 16 - Standard & Poor's Ratings Services said today that it assigned its preliminary 'BBB-' unsecured debt rating to Lorillard Inc.'s (BBB-/Stable/--) most recent Rule 415 shelf registration, dated June 13, 2012. At the same time, we assigned a 'BBB-' senior unsecured debt rating to Lorillard Tobacco Co.'s proposed $500 million senior unsecured notes due 2017. Lorillard Tobacco Co., a wholly owned and primary subsidiary of Lorillard Inc., issued the notes under the company's most recent Rule 415 shelf registration, and Lorillard Inc. fully and unconditionally guarantees the notes. We expect the company to use net proceeds from the proposed debt offering for general corporate purposes, which may include the repurchase, redemption, or retirement of securities (including common stock repurchases), acquisitions, working capital requirements, and capital expenditures. Lorillard also announced that it has revised its long-term unadjusted leverage target such that the company expects to maintain a ratio of total debt to EBITDA of 1.5x up to 2x, compared with a leverage target of about 1.5x previously. We expect the company will continue to maintain key credit metrics consistent with or slightly better than the indicative ratios for an "intermediate" financial risk profile. This includes maintaining lease- and pension-adjusted total debt to EBITDA of 2x or below. Pro forma for the debt issuance, we estimate lease- and pension-adjusted total debt to EBITDA to be approximately 1.7x (based on Lorillard's financials through the 12 months ended June 30, 2012), and we forecast leverage will be about 1.6x by the end of 2012. RELATED CRITERIA AND RESEARCH -- Summary: Lorillard Inc., June 28, 2012 -- Key Credit Factors: Criteria For Rating The Global Branded Nondurable Consumer Products Industry, April 28, 2011 -- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, May 27, 2009 -- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008 RATINGS LIST Lorillard Inc. Corporate Credit Rating BBB-/Stable/-- New Ratings Lorillard Inc. Rule 415 shelf registration BBB- (prelim) Lorillard Tobacco Co. $500 mil. sr unsecd notes due 2017 BBB- Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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