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Announcement:

Moody's reviews Dean Foods Ba3 CFR and other ratings for downgrade

Global Credit Research - 08 Aug 2012

New York, August 08, 2012 -- Moody's Investors Service today placed the ratings of Dean Foods, Company (Corporate Family Rating at Ba3) on review for downgrade following the announcement that it will IPO and then spin off its WhiteWave/ Alpro Division.

RATINGS RATIONALE

Dean Foods announced yesterday that its wholly owned subsidiary, the WhiteWave Foods Company, has filed a registration statement with the SEC for an initial public offering. Following the IPO, Dean will own at least 80% of WhiteWave's common stock, which it then intends to spin off to its shareholders in a tax free distribution to occur no earlier than the expiration or waiver of a 180-day lock-up period after completion of the IPO. Dean Foods has stated it will use IPO proceeds, as well as new debt that will be issued at the WhiteWave level, to repay and reduce debt outstanding under its existing senior secured credit facility, while at the same time narrowing the focus of the remaining company to be more reliant on its volatile and low margin commodity milk business.

Moody's rating review will consider the effects of the IPO and related debt reduction , along with the subsequent spin-off of White Wave, one of Dean's most profitable and fastest growing businesses. The review will consider the post-spin leverage at Dean Foods which could remain high after taking into account Moody's adjustments, based on our expectation that most of the pensions and leases will stay behind with the remaining company as well as the appropriate instrument ratings in light of the expected change in capital structure. Moody's will also consider the strength of Dean's business profile following the spin-off of one of the company's most attractive assets.

Dean's Ba3 rating reflects its very narrow margins inherent in its largest, commodity-oriented milk business, high leverage, more limited product, geographic and customer diversification than several of its food and agriculture company peers, and the potential for high earnings volatility due to fluctuating milk prices and low pricing power. The rating is supported by the company's leading market share, national scale in the US dairy industry, and strong distribution network with comprehensive refrigerated direct store delivery systems. The rating also reflects the potential for further cost efficiencies/productivity improvements as management focuses on internal integration, streamlining of operations and further cost reduction initiatives.

The following ratings were placed on review for downgrade:

Corporate Family Rating of Ba3

Probability of Default Rating of Ba3

Sr Sec Bank Credit facility at Ba3, LGD-3, 42%

Sr Unsecured at B2, LGD5, 88%

The principal methodology used in rating Dean Foods was Moody's Global Packaged Goods Methodology, published in July, 2009 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Dean Foods ("Dean") is the largest processor and distributor of milk and various other dairy products in the United States and the largest producer of soy milk in Europe. The company also markets and sells a variety of branded dairy and dairy-related products including, Silk ® soymilk and almondmilk, Horizon Organic ® dairy products, International Delight ® coffee creamers and beverages, LAND O'LAKES ® creamers and fluid dairy products, and cultured dairy products. Headquartered in Dallas, Texas, Dean Foods had sales of approximately $13 billion for the latest twelve months ending June 30, 2012.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Linda Montag
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's reviews Dean Foods Ba3 CFR and other ratings for downgrade
No Related Data.

 

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