Moodys.com
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

 

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

Terms of One-Time Website Use

 

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

 

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

 

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

 

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

MOODY'S PLACES RATINGS OF ALTRIA, KRAFT AND PHILIP MORRIS CAPITAL CORP. UNDER REVIEW FOR POSSIBLE DOWNGRADE

24 Mar 2003
MOODY'S PLACES RATINGS OF ALTRIA, KRAFT AND PHILIP MORRIS CAPITAL CORP. UNDER REVIEW FOR POSSIBLE DOWNGRADE

Approximately $20 Billion Of Debt Affected

New York, March 24, 2003 -- Moody's Investors Service placed the long and short-term ratings of Altria Group, Inc. ("Altria"), Kraft Foods Inc. ("Kraft") and Philip Morris Capital Corp. ("PMCC") under review for possible downgrade. Ratings placed under review are as follows:

Altria:

A2 for senior unsecured rating

Prime-1 for commercial paper

Kraft:

A2 for senior unsecured rating

Prime-1 for commercial paper

PMCC:

A2 for senior unsecured rating

Prime-1 for commercial paper

The rating review is prompted by the March 21 verdict of an Illinois Third Circuit Court judge, who found Philip Morris U.S.A. liable in a class-action consumer fraud lawsuit (the Miles case) and ordered the company to pay $7.1 billion in compensatory damages (including $1.78 billion in lawyers' fees), $3 billion in punitive damages to be paid to the state of Illinois. The claim asserts that Philip Morris U.S.A. communicated to consumers that they would inhale less tar from "lights" cigarettes, even though it allegedly knew that they would inhale more because of increased ventilation on these than on regular cigarettes. In order to stay the execution of the judgment, Philip Morris U.S.A. must post a bond. The judge has granted 30 days to both parties to file post trial motions. Only after the judge will have ruled on these post-trial motions will he enter the final judgment. When the verdict is entered, Philip Morris U.S.A. will have to post a bond for $12 billion to stay execution of the judgment. In the meanwhile, the judgment has been stayed by the judge.

The review of Kraft's ratings reflects the importance its operations play within the Altria group, as well as the potential financial impact that a substantial cash need at Altria could have upon Kraft. Moody's view is that current ratings do not accommodate any material increase in dividends from Kraft, or the leveraging of Kraft in order to upstream cash to its parent. Due to the magnitude of the Illinois judgment against Philip Morris USA, as well as the speed with which bonding may need to occur, Moody's considers that Altria may have no choice but to consider some or all of these options. Moody's notes that the review for possible downgrade is not reflective of Kraft's otherwise very strong operations and cash flow.

The review will focus on the following factors:

(1) The impact of legal bonding eventually required of Philip Morris U.S.A. on the financial flexibility of Altria;

(2) Any structural subordination of existing indebtedness possibly induced by any pledge of assets for the purpose of bonding;

(3) The level of additional liabilities that could result for Altria;

(4) The level of additional liabilities that could result for Kraft;

(5) Prospects for future adverse decisions against Philip Morris USA with the same level of potential ramifications on additional liabilities and liquidity as Miles.

Philip Morris U.S.A. as a standalone legal entity currently does not have sufficient available cash or committed financing to post a $12 billion bond. Moreover, on a consolidated basis, there is not sufficient unused committed credit availability to allow Altria to enable Philip Morris USA to post the bond in its current maximum magnitude. However, during the upcoming 30 days and possibly beyond, it is likely to pursue one or several of four possible options:

(1) Seek judicial relief. On an emergency basis, Philip Morris U.S.A. could file an interlocutory appeal asking a higher court to intervene and reduce the bond amount. The basis for the appeal could be alleged excessiveness of the award, which could be deemed to be an obstacle to the company's constitutional right to appeal. If Philip Morris U.S.A. filed such an interlocutory appeal, the higher court would likely answer within days whether it would take up the case. If it did, there would likely be an automatic stay on the judgment until the higher intermediate court rendered its verdict. If the higher court declined to take the case or left the verdict intact, Philip Morris U.S.A. could file the same appeal with the Illinois Supreme Court or the U.S. Supreme Court, again on an emergency basis.

(2) Seek legislative relief. Several weeks ago, bills seeking to cap at $25 million bonding in cases where a cigarette company is found liable were introduced in the two chambers of the Illinois legislature. Similar legislation has been passed in a number of states, where lawmakers have been concerned that excessive awards resulting from court verdicts could lead cigarette companies into bankruptcy and threaten the stream of payments from these companies to the states under the Master Settlement Agreement. The Illinois legislature is currently in session. If it passed such a bill in the appropriate form and the governor of Illinois signed it, Philip Morris U.S.A. could post a bond at a reduced level. However, this bill could still be subject to judicial challenge. Such a challenge would most likely lead to appeal by Philip Morris USA through the Illinois court system. The outcome of this appeal would be uncertain .

(3) Seek an agreement from the court to reduce the amount of bonding below the amount of the judgment, or the type of bonding. Under Illinois law, a court has the authority to do this.

(4) Seek support from its parent Altria. Altria owns 100% of Philip Morris U.S.A. The U.S. tobacco subsidiary is a significant free cash flow contributor to Altria. Currently, Altria does not have sufficient availability under its committed facilities to finance an intercompany loan to its subsidiary for the full $12 billion. However, it could possibly gather sufficient funds through a combination of several actions, such as drawing under the Altria credit facilities, asking its 84 %-controlled Kraft subsidiary to accelerate the repayments of notes owed to Altria and liquidating some of its ownership in Kraft on the open market. On the basis of current market prices, Altria's stake in Kraft is worth approximately $44 billion. Also, Moody's notes that Kraft could provide additional support to its parent, since the terms of the Kraft credit facilities do not prohibit drawdowns for the purpose of providing intercompany loans.

Altria's liquidity is provided by a commercial paper program backed by a $3 billion 364-day revolver maturing July 14, 2003 and a $5 billion five-year revolver maturing July 24, 2006. These facilities include an event of default for legal decisions of more than $100 million against Altria or one of its major subsidiaries that remain unstayed for more than 60 consecutive days. This period is extended to 180 consecutive days as long as plaintiffs do not successfullyexecute on the judgment. Altria must meet a minimum consolidated EBIT/Net interest of 2.5. At the end of the third quarter of 2002, the company's actual ratio was 13.7. Kraft's liquidity is provided by a $3 billion 364-day revolver maturing July 14, 2003 and a $2 billion five-year revolver maturing July 24, 2006.

Moody's notes that the Miles verdict occurs in the context of a difficult operating environment for Philip Morris U.S.A. Because of the price gap between signatories and non-signatories introduced by the Master Settlement Agreement, a fourth tier segment has steadily grown since the end of 1998 and now represents approximately 10% of the U.S. cigarette market. While Philip Morris U.S.A. derives a large portion of its operating income from its Marlboro premium brand, its profitability in 2002 has been significantly impacted by the costs of additional promotions (under the form of consumer coupons) launched in the fourth quarter of last year for the purpose of narrowing the price gap with the low end of the market. While increased competitive pressure in the U.S. tobacco market has not yet affected the performance of Altria (its 2002 consolidated operating income was essentially the same as the previous year's -- $17,291 million vs. $17,482 million), it could do so in the future.

Friday's verdict illustrates the vulnerability of Altria and other tobacco companies to adverse legal decisions. It is too early to determine whether plaintiffs' attorneys considering bringing consumer fraud cases against the tobacco industry have found a template in Miles. The Madison County, Illinois jurisdiction is reputed to be abnormally hostile to corporate defendants. Similar consumer fraud claims have not been certified in other states. However, Altria and other tobacco companies face hundreds of claims. This increases the odds that severely adverse decisions will from time to time be rendered against them and potentially induce bonding issues as in Miles.

Based in New York, New York, Altria is a holding company, controlling 100% of Philip Morris U.S.A., a domestic tobacco manufacturer; 100% of Philip Morris International, an international tobacco manufacturers; 100% of Philip Morris Capital Corp., a subsidiary engaged in leasing activities; and 84% of Kraft Foods Inc., a food manufacturer

New York
Angela Jameson
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Christophe Razaire
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR  PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. 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 or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​
Moodys.com