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Related Issuers
Rating Action:

Moody's upgrades Wrigley to Ba1; outlook is stable.

Global Credit Research - 18 May 2011

Approximately $2.1 billion of secured debt instruments affected, including $1.8 billion of 144A notes

New York, May 18, 2011 -- Moody's Investors Service ("Moody's") today upgraded the Corporate Family Rating and Probability of Default Rating of the Wm Wrigley Jr. Company ("Wrigley") to Ba1 from Ba2. Moody's also upgraded the ratings on $2.1 billion of secured debt instruments to Baa1 from Baa2. The outlook is stable.

The ratings upgrades reflect the further progress Wrigley has made in reducing the high financial leverage that resulted from the acquisition of the company in 2008 by Mars, Inc. ("Mars"). The upgrades also reflect the meaningful operational improvements achieved under the influence of Mars, including significant cost and working capital savings. Although Wrigley remains an independently-operated subsidiary of Mars, Inc., the companies have benefited mutually from the sharing of best business practices.

RATING RATIONALE

Wrigley's Ba1 Corporate Family Rating reflects Wrigley's strong qualitative factors — including its portfolio of well-known confectionary brands, high profit margins, and global reach. Wrigley's financial leverage remains high and its interest coverage weak for the current rating category, but should continue to steadily improve over time through debt repayment and earnings growth.

Ratings upgraded:

Wm Wrigley Jr. Company:

- Corporate Family Rating to Ba1 from Ba2;

- Probability of Default Rating to Ba1 from Ba2;

- $200 million senior secured revolving credit facility due 2014 to Baa1 from Baa2;

- $149 million senior secured bank term loan due 2014 to Baa1 from Baa2;

- $1.8 billion of senior secured notes due 2011-2014 to Baa1 from Baa2.

On January 4, 2011 Wrigley entered into a new $200 million one-year revolving credit agreement with Mars that expires December 31, 2011. The terms of the new agreement are similar to the preexisting senior secured $200 million revolving agreement provided by Rabobank, but is not rated by Moody's.

The stable outlook reflects Moody's expectation that Wrigley will continue to make progress de-levering and simplifying its capital structure over time, but that it could take some time before the company is able to adequately address its restrictive, high-cost capital that resulted from the acquisition by Mars. For example, Berkshire Hathaway still holds $4.4 billion of high-cost 11.45% subordinated notes due 2018 of Wrigley and $2.1 billion of 5% preferred stock of Wrigley and of the holding company that legally owns Wrigley's stock. These securities are all serviced by Wrigley's cash flows, which weakens its credit metrics.

"Qualitatively, Wrigley already has a high-grade profile," said Brian Weddington, Senior Credit Officer at Moody's. "To the extent it can further align its capital structure with its strong fundamentals, we could begin to consider a move to investment grade," added Weddington,.

An upgrade to investment grade would also require Wrigley to maintain stable operating performance and to sustain stronger credit metrics, including debt/EBITDA leverage below 4.0 times, and EBITA/interest of at least 3.0 times. Conversely, if operating performance deteriorated such that debt/EBITDA is sustained above 5.0 times, a downgrade could occur.

The assigned Baa1 ratings on the senior secured debt instruments are three notches higher than the Corporate Family Rating, reflecting their all-assets secured position. There is currently $6.1 billion of unsecured funded debt (not publicly rated by Moody's), or 76% of total funded debt that is ranked below the senior secured debt.

Moody's takes into consideration the implicit support of parent company Mars, which has invested nearly $14 billion in cash and assets in Wrigley and has a comparatively stronger credit profile. This enhances Wrigley's liquidity profile, however, given that there are no formal support agreements in place, such as parent guarantees from Mars, the relationship does not currently provide sufficient lift to warrant notching Wrigley's ratings higher.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The principal methodology used in rating Wm Wrigley Jr. Company was the Global Packaged Goods Industry Methodology, published July 2009.

Wm. Wrigley Jr. Company, a Chicago, Illinois-based, wholly-owned subsidiary of Mars, Inc., is a leading global confectionery products company and the largest manufacturer of chewing gum in the world. Wrigley's products are sold in over 180 countries. Key brands include: Doublemint, 5, Orbit, Extra, Starburst, Skittles, Eclipse, Altoids and Life Savers. Net revenues in fiscal 2010 totaled $6 billion.

Mars, Incorporated, headquartered in McLean, Virginia, is a family-owned leading producer of confectionery, food, and pet care products. Mars operates in over 66 countries. Key brands include Dove, M&M's, and Snickers confectionery products, Uncle Ben's rice, and Pedigree and Whiskas pet care products.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service 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 the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Brian Weddington, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's upgrades Wrigley to Ba1; outlook is stable.
No Related Data.

 

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