TEXT-S&P rates Lorillard's notes 'BBB-'

Thu Aug 16, 2012 10:41am EDT

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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